Mutual Funds

Should You Invest In Direct or Regular Mutual Funds

Investors who are planning to invest in mutual funds might have heard about these terminologies. First, let me explain about investing in direct mutual funds vs regular mutual funds

Regular Mutual Funds: Here distributors(intermediaries) or advisors or agents sell a mutual fund. Here mutual fund companies pay commissions to intermediaries, hence expense ratio of regular funds is always on the higher side.

Direct Mutual Funds: Here mutual funds companies sell mutual funds directly on their websites, lately even companies like Paytm, Groww, Kuvera, and so on selling both direct and regular mutual funds on their platform.

What investors have in store for direct and regular mutual funds?
  1. Regular mutual funds come with an advisory note, for newbie investors going with regular mutual funds makes sense especially platforms like Scripbox.

  2. Advisors should advise very few funds into equity and debt investors do not have to go through the pain of searching good funds from more than 2500 schemes.

  3. Direct mutual funds come with lesser expense ratio which translates to better returns than regular mutual funds, which will be quite substantial gains in the long run.

  4. If investors want to view all his investments in one place and need a regular review of there funds and portfolio. Just you to go with regular funds with a good advisory platform.

  5. The expense ratio being higher on regular mutual funds does not mean it’s bad rather you get additional benefits of the transaction-related benefits like skipping current month SIP, smooth handling of bank, name, and address change request.

  6. Just avoiding regular funds to pay excess expansion ratio and buying bad directs funds without much research would be a bad decision and end up making poor returns.

Based on how well you can manage your funds decide whether you want to invest in regular or direct funds. If you have a deep understanding of how mutual funds work you can choose direct funds, else go ahead with a good advisor.

Debt Mutual Funds

Are Debt Mutual Funds Safe To Invest?

As an investor, you must be worried about the recent crisis with Franklin Templeton’s AMC decision to wind up 6 debt funds. Now investors are stuck big time in these funds if they had invested with a viewpoint of short term investment or to get that extra profits compared to other debt funds. Always choose carefully when capital is of utmost importance and need them in a short period. Funds which got winded up

  1. Franklin India Low Duration Fund
  2. Franklin India Ultra Short Bond Fund
  3. Franklin India Short Term Income Plan
  4. Franklin India Credit Risk Fund
  5. Franklin India Dynamic Accrual Fund
  6. Franklin India Income Opportunities Fund

Franklin has stopped SIP/STP or one time investments and withdrawals from all the above funds. All these funds were holding bonds/commercial papers and other assets which were riskier in nature to earn that extra profits for investors.

What happens to my money invested in these funds?

Franklin Templeton will start liquidating their assets once the situation stabilizes and start paying lenders and unitholders, they will wait for the maturity of all the bonds and commercial papers they have held till date. The decision was taken considering the best interests of the investors.

Yes, debt mutual funds have to be examined before you invest in any of them, these years the treatment they got as safe funds is untrue unless they are holding to good assets that can be sold or brought into bad situations as well. Next, you might be thinking about how will a retail investor get to know which are best suited.

If you are looking for a short term (7-120 days) go for liquid funds where risk is lesser as compared to short or low duration funds. I have been investing with Scripbox for the last 4 years and they take care of risk and returns of all their recommended funds.

Debt funds are good if chosen well, else there is always a risk attached to investments made anywhere. You need to understand the underlying risk your willing to take. Let me know if you have any questions or suggestions.