Too much is being made about the investing sense of the common man. Just too much.

If all investors are rational, they would ALL buy term insurance and invest the balance. This has not happened in ANY part of the world. All over the world ULIPs are sold by various names and in various shapes and sizes.

If all investors are rational, India would have had 5-6 mutual funds, 30 schemes, and a huge index fund AUM. The truth is we have 43 mutual funds, 100 more wanting to enter, 10 of them profitable, and 3-4 of them criminally profitable.

If all investors are rational, people will have one bank account, one demat account, one credit card,… real life they have at least 5 bank accounts, 2 bank lockers, multiple demat accounts…..

If all human beings were rational, they would buy vegetables, clean it, and cook at home. Tch, tch sensitive topic, right?

So if a ‘direct’ option is available, what will happen? Well people will have an option to invest directly.

Will people use it?



Simply because people will be pushed to that by websites, magazines, pundits…..

Should people invest directly or through an agent?

Depends on whether the ‘agent’ adds value  in the real sense. If he does not, just ignore him

What value does an agent add?

He uses past data to tell you that Icici Pru’s Naren is smarter than Prashant Jain -because his past one year record is better than Prashant’s.

My take is Hdfc, Templeton and Naren Sankaran are all good fund managers 🙂 The irony is intentional.

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  1. From SEBI’s guidelines :”such separate plan shall have a lower expense ratio excluding distribution expenses, commission, etc, and no commission shall be paid from such plans. The plan shall also have a separate NAV.” Investors of these plans can expect a lower expense ratio of up to 1% which is the sub-limit for marketing and selling expenses including agents” commission and statutory advertisement.

    The portfolios would be exactly the same, just returns will differ , not because of different stocks held, but due to the expense ratio. Hope this clarifies

    Direct investing is better for knowledgeable investors who feel equipped to handle all aspects(folio consolidation ,address change) etc by themselves to all the fund houses they invest in and not via a distributor/advisor.So in the end it boils down to you whether you want to pay that extra money and what benefits accrue to you.

  2. I am also been a Direct investor for about 4-5 years now. No distributor.

    From January 1st, I am hoping they will migrate me automatically to the “Direct” plans to be introduced by the MFs. Though a little skeptical if they will AUTOMATICALLY migrate.

    They may probably ask the investors to *explicitly switch* to the new “Direct” plans and in the interim make money from investors ( also from those who forget to switch ).

    @Rajeev, as Nishant says correctly above, the investment portfolio remains same.

  3. Interesting.
    Thank you for the clarifications. I was not aware of this development.
    I like having options. If the option is available to choose between low or high expense ratio, then I will personally choose the direct investing route. Hope this does not lead to initial charges for switching to the “direct”schemes.

    In either case, it shows maturation of the market.

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