Direct Mutual Funds vs. Regular: Exploring the Benefits of Regular Investing

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I recently had a guest who showed interest in our investment services. However, after a thorough discussion, he seemed puzzled about choosing between the direct and regular options. He straightforwardly asked me, "What advantages do I have as an investor with the regular investment option?" If you're also wondering about the advantages of choosing regular investing through an agent or mutual fund distributor instead of going direct, then you are at the right place.

We are all familiar with sports legends such as P.V. Sindhu, Novak, and Ms. Dhoni. Each of them excels in their sport. What ties them together is the presence of a coach who helps them reach the pinnacle of success. Without their coaches, they wouldn't have achieved such expertise or championship titles.

They are undoubtedly skilled players. They have consistently shown their talent on the field. However, to reach the status of a champion, having a coach is crucial. This is where the importance of regular investing comes into play. Let's get into the difference between direct investing and regular investing to provide a clear understanding.

That's why the expense ratio is lower without a mutual fund distributor involved. Buying the mutual fund costs less, saving you money. However, it's up to you to figure out your needs and select the right mutual fund. Investing time, energy, and effort into researching the top-performing funds is essential. So, put in the work to invest wisely.

So here’s how the difference plays a role for investors. For individuals who are financially savvy and like to have control over their decisions, the direct option is ideal. On the other hand, regular investing involves buying mutual funds through an intermediary like an agent, broker, or distributor.

Direct Investing

Regular Investing

Benefits of Investing Through a Regular Option

1. Personalized Investment Guidance with Expert Advice

Have you ever wondered about the advantages of investing through a regular option? Well, one of them is the personalized attention you receive from the intermediary. They sit down with you to truly understand your risk appetite and the specific goalposts you're chasing. By considering your temperament, they can recommend suitable schemes for your investment option. With their guidance, you can confidently pick and choose the funds that align with your financial goals.

2. Streamlined Investment Process for Busy Individuals

In this scenario, there's a little bit of homework involved. The distributor shoulders the responsibility of handling all the paperwork, research, and execution to ensure your funds are properly invested. Additionally, individuals with hectic day-to-day schedules, who lack the time to continuously research and identify the most suitable investment options, will find regular investment options to be their best fit.

Difference Between Direct Investing And Regular Investing

We conducted a thorough examination comparing direct investing to regular investing spanning the last 11 years. Direct investing commenced on 01.01.2013, thus boasting an 11-year track record. Upon reviewing the analysis, the results are as follows. 

For instance, in the case of the HDFC Top 100 Fund, we observed an extra cost of 0.7%, whereas the direct mutual fund yielded a return of 16.37%. With a return of 15.67% and an additional cost of 0.7%, the regular mutual fund performed well. On the other hand, the ICICI Bluechip Fund had a slightly higher cost of 0.8%. Despite the slightly lower return compared to the direct mutual fund, regular investing offers unique advantages for investors to consider.

Is there more to gain from regular investing than just the added expense? Yes! We've identified 7 benefits that regular investors can enjoy when investing in mutual funds through a regular scheme.

Check out the video link for a more in-depth understanding 

Benefits of Regular Investing 

1. Mutual Fund Investments with Specific Goals for Success

When it comes to mutual funds, the key is to connect them with your specific goals. By linking your investments to a well-defined goal, you enhance your ability to stay committed and accomplish what you set out to achieve. Maintaining your focus is paramount, and your investment advisor will be there to provide constant support and guidance, ensuring that you reach your desired goalposts.

2. Portfolio Adjustments for Consistent Mutual Fund Performance

The performance of funds can vary over time. There are instances when certain schemes may not meet the expected standards. In such situations, it is the distributor who will reach out to you, suggesting modifications to your portfolio. These adjustments are aimed at maintaining the performance of your investments and delivering the returns you initially agreed upon.

3. Expert Guidance Through Market Volatility

The ups and downs of the market can leave even the most seasoned investors second-guessing their decisions. During times of uncertainty, turning to your mutual fund distributor for guidance can be invaluable. Their experience and insights can help you navigate market turbulence and make informed decisions, ensuring you stay on course toward your financial goals.

4. Tax Season Support from Mutual Fund Distributors

Each year during tax season, your CA will need several documents from you. These documents will include your capital gains, dividend, and interest statements. Your mutual fund distributor can conveniently gather and provide all of these to you.

5. Mutual Fund Distributors Offer a Range of Investment Products

Mutual fund distributors don't just deal with mutual funds; they also provide access to various investment products such as bonds, debentures, and portfolio management schemes. By selecting a regular option, you not only get exposure to mutual funds but also gain access to a range of different investment options that are tailored to meet your specific requirements.

6. Making Broader Financial Decisions with the Help of Mutual Fund Distributors

It's not always just about investing; there's more to consider. Sometimes, you're faced with different financial decisions, like whether to use your bonus to pay off a loan or explore other options. In these situations, your mutual fund distributor can provide the guidance and support you need to navigate your choices.

7. Reassessing Financial Goals with Guidance from Your Distributor

Financial goals are intended for the long run, but it's important to revisit and review them periodically. Every three years, your mutual fund distributor will meet with you to discuss and assess your plans, ensuring they align with your objectives. If any discrepancies are found, your distributor will promptly take corrective actions to keep your funds on track.

Check out the video link for a more in-depth understanding 

These are the seven advantages you can typically anticipate from your mutual fund distribution. Remember, there's no such thing as a free lunch! Every expert charges a fee, and for mutual fund distributors, that fee comes in the form of commission or brokerage from your investments.

To achieve your financial goals, he offers a wide range of services. By ensuring that you can invest peacefully and focus on your career, your mutual fund distributor has truly provided you with exceptional service.

I am Babu Krishnamoorthy, the head Sherpa at Finsherpa Investments, Private Limited. If you observed any bias towards conventional investing in the video, it is because we are distributors of mutual funds and provide regular investment options for our clients. We intend to be completely transparent so you have a clear understanding of our perspective. I hope this information is beneficial to you.

For the complete video experience, click on this link