Few year back in 2021 i invest in idcw dividend balance advantage mutual fund at nav 25.8 now it’s 40.6 nav per month dividend is .25 per unit it was regular plan
Now I want to switch to direct plan with impacting my monthly dividend which means i need to maintain same unit in direct as it is in regular plan.
Also I don’t want to give ltgc tax so to get exact 1 lac capital gain
If I sell and purchase at same unit in both plan I have given 40k extra from my pocket.and as it is idcw dividend plan it’s nav will not so dynamic that I can recover this loss in future as if it was a growth plan .
navs being different doesn’t mean its a loss, difference is meaningless.
nav is relevant only for a single fund and has no meaning when compared. 100 nav of one fund does not make its assets cheaper than a 200 nav fund. Same as stocks, if one stock is 100 Rs and another is 200Rs, relatively it does not mean anything.
value = nav * units. If nav is higher, units will be lower. Does not mean you lose money. units dont have to be same.
I use growth direct always, least amount of hassle there.
Only impact is taxation, manage that as you want and just switch from one to another. No need for STP, can do it in one go too as its same fund basically.
Are you sure about this?, i dont remember 100% but i think i had switched them. Need to use Mutual fund website directly.
Only possible if in non demat mode i guess, in demat mode will need to sell and buy probably, dunno.
What he seems to be worried about is that he will lose money if he switches because nav is higher and so he gets less units. nav is lower for dividend regular because of dividends and commissions. He doesnt lose by switching but will make more in future because commissions reduce.
Switching between MFs is same as selling the entire thing, paying tax and buying the other fund. For tax and compliance purposes it will be recorded as a sale + buy
At that point, you might as well do manual sell+buy and avoid worrying demat, non-demat, whether MF site supports switching, etc
More important than HOW is the WHY? Do you have a solid reason for shifting (other than the commission riff raff that social media promotes).
Are you well equipped with the vagaries of market. Do you feel confident about your MF picking skills and more importantly about your ability to review your goals and stick to the plan during hard times???
Think 300 times and than again 200 times before taking action on suggestions of some GENIUS from social media.
What part of avoiding commissions is not a legitimate reason?
They are not even changing the fund. Switching from regular to direct increases your returns without doing anything. Portfolio, fund manager, risk everything is same
yes ofc, only meant that we can do it. Taxation impact is there as i said already too.
Manual switch is more convenient one step fix, amount doesn’t hit bank.
And you can get same day nav in many cases.
Anyway, his primary concern was losing value.
Nonsense, commissions compound and become sizable with time, like 20-30% difference over a decade or two. For long term holding, its definitely better to switch to direct if dealing with investment yourself.
There is nothing to pick, just take index products will do for most. Yes, holding through bad times is important. But that assumes buying regular will help, maybe for a small section of people it might if given good regular advice. Other than that, no reason to do this. And this is very expensive advice, taking cut every year from full deployed capital. Very inefficient. Better to pay for advice directly if one needs it.
Just buying a fund is not an investment plan. There is much more to it which the MFD handles.
Please check the number of stopped SIP and the redemptions during a bear market. Also check the % of direct funds vs regular funds that were redeemed (or SIP stopped) during bearish phase or crunch time.
Ofcourse these could be avoided if the investor was well skilled. Those skills can be obtained (Not very difficult to obtain) but do check the opportunity cost of it. More often than not, you will find it is much more peaceful to outsource it.
A good MFD, in the course of the investment tenure (15 to 20 years) provides value that avoids lot of heartache and is much valuable than the few % points that you pay. Some of them, also have track record of beating the direct fund by timing the market. I know few of them who have been able to do it over a long period.
Just think why do most of the people not able to make money in the market. Forget FnO, talk about long term investing only. Just buying and holding a direct fund is enough, isn’t it???
If dealing the investment yourself then yes, direct is better. But the question is are you well equipped to handle it yourself??? Are most of the Indians (especially the middle class Indian) well equipped?? The skills can be obtained but is it worth the opportunity cost??? Think of it. You will find outsourcing it much more peaceful.
I beg to differ. Index funds will not do for most. All the nonsense that social media speaks is right for large caps, but not for mid caps and definitely not for smallcaps. The social media GENIUSES don’t even talk about smallcaps as they know their data fails there.
Index funds are very good for certain class of people (definitely not suitable for the Indian middle class) just like endowment plans are good for certain needs (I’m not a fan of any Insurance plan other than Term plan). Just like endowment plans except the person who needs it everyone else buys it. Index funds too.
A small cut of the corpus is paid to the MFD. If this is not efficient then do suggest another way. Direct fee is not the solution. The advisors should only make money if the investors makes it.
Do check the advice of fee only planners and MFD’s. Also check whose interest is aligned with the investors interest, then take a call. Lets not talk without data.
Somehow, you have hijacked the thread to the question of whether we should do it.
Anyway last reply, op can make up his own mind.
Costs add up.
Just in 10 or so years, HDFC Flexicap Regular has lost 8% value vs Direct with nav 1804.6640 / 1959.3510. This is the difference and can be larger or smaller depending on difference in expense ratio and the difference will keep increasing with time.
@neko, if confused by this, better to look up freefincal and gain better insight.
Just some picks from results, did not read and some may seem outdated due to cyclical behavior.
There is hardly any skill needed for basic investing. Only some general knowledge and then we need to experience it yourself and hold through tough periods and not be carried away in good times.
I dont disagree that some advice could be useful, at the same time its not a difficult thing and most should be able to learn on the go themselves, there is lots of advice available publicly. I have 15 or so years of investment exp and did ok without advice.
The cost demanded by regular funds is obscene. Advice should be paid for directly without linking it with investment.
Moreover, most people would invest in regular funds through their brokers - icici/hdfc etc. These people have absolutely no reason to invest with regular plans and should shift to direct.
yup, its enough. Have done it, my family members do it too. All you have to do is invest and hold for long term. Stop looking at the pnl. Thats it.
Some allocation etc can be useful and seeking knowledge through sites like value research / freefincal is enough. Its well worth it for everyone to do this themselves.
Wrong. % cost is just too much. Why should it be a % cost every year ? Over a few decades this leads to capital erosion of 20-30%. That is too much for something that isn’t very difficult to do once you understand.
And some active mutual funds beat the market, so what? It would be harder to find someone who can do that and there is a high chance that it was just luck. Cost is too high.
yes, in my time active would beat passive easily and then times changed. Same may or may not happen with smaller caps. But anyway, not everyone should invest in small caps.
Right now they are booming, and that is where retail people make mistakes and will suffer later. I did not invest in small caps and did fine.
I do not have data and am not really interested in this space right now. So cant say about active vs passive. That said i am sure that advice cost is way too high to be worth it in general. A good advisor will probably be rare and they might be worth it, but in most cases - no.
Freefincal!!! The physics professor who knows how to cure cancer, build a bridge and also how to invest. The same guy who invests in active funds but advocates passive. The same guy who says opt for new tax regime even if you pay higher Income Tax. Why does he never walk his talk??? You MUST follow him only.
Perseverance is a skill friend. You may call it any other name if “skill” doesn’t suit you. If you have been able to do it - Congratulations!!! Take pride in the fact that you belong in 10% of investors. We are talking about the other 90%.
I beg to differ. Advice should be linked to corpus only than the ulterior motive will be to increase the corpus, show good returns, etc. Otherwise social media vultures are there (including our beloved professor) to throw the investors off track. Just introspect, why do these vultures give you FREE advice. Do you remember elders talking about FREE being POISON???
I agree with you here. If the MFD is not adding visible value then you must fire him / her. Just because few are like that, you should not blame the entire profession. There are black sheeps even in noble professions like Medicine, farming, etc.
It is a small %. Over time it does add up but so does the value addition by the MFD.
I agree it is not very difficult to do once you learn it. I again urge you to think in terms of opportunity cost for the time taken to learn it.
I disagree. There is a luck factor, but it reduces over time and becomes negligible.
In today’s time also active beats passive (it is difficult in large cap). Not everyone need invest in smallcap but that is where the real money is. There is volatility (not risk) involved, it has to be managed. Inspite of the beating smallcap funds take sometimes, over time their CAGR is very good.
Good for you.
Then please don’t comment without data.
This breed (good advisor) was never rare. Bad NEWS just travels faster, so you see them more. After certain measures taken by SEBI the breed of bad advisor has become rare. Do lookout.
As i said i no longer look at these things, but i read many articles from him and they looked good to me. Buffet says no to leverage and uses it himself. Doesn’t mean he is wrong on either count.
Anyway, I have no inclination to continue this.
Giving up a third of your returns over your lifetime for generic advice looks wrong to me.
I did not say free, some kind of reasonable fixed payment for advice is fine. But good free advice is available on internet too.
Opportunity cost - ideally, learning should happen before or once people start earning. Capital is low and time is plenty. Best time to learn. Someone retiring soon, yes i agree he needs to get good advice on how to manage. But still, don’t agree with % based fees, that’s criminally high in most cases.
small caps - Its easy to say when they are doing well. Before covid they were struggling. Everything has cycles. For avg investor, i don’t think its worth the risk. As an active investor in future, i will probably look at them ofc.
and ofc the very best guys who actually can make money above market returns for clients deserve to be paid well. Renaissance fund takes extremely high fees and is well worth it for those who have access.
Problem is in being to able to find such guys and further to be able to separate luck from skill which will only be visible in long term returns. Yes long term, decades probably - agree there. In short term its mostly luck.
The commission is more or less the same in all funds (except the new ones). If a MFD did suggest a bad fund, how long does it take for the investor to discover that. Few years, at max. How much commission would have been paid in that time? (Most of the middle class investors choose SIP mode in which the initial years corpus is very small)
Any MFD who wants to be in this business for the long run cannot afford to stick with bad recommendations. If the investor is casual with his / her investments then there is a chance they ight be taken for a ride. As always “caveat emptor” remains.
They keep getting new bakras. How do you think banks survive by selling bad ULIPs and market linked insurance products? almost everyone who has invested in them stays away from them. They keep getting new customers
Please do not compare Warren Buffet to the professor. Warren uses very low leverage (around 1.7 to 1). The professor is off track by large. Some articles are good doesn’t mean he is good. Be careful!!! Also if you no longer follow closely, then please don’t comment.
An average middle class Indian opts the SIP route and the monthly SIP is around 25000 per month for a tenure of around 20 years (I’m being optimistic here). At the end of 20 years assuming 15% returns in a regular fund the corpus would be around 3.8 crores. Assuming a difference of around 1% between regular and direct funds (Very rarely is it more than 1%), CAGR of 16% would give a corpus of 4.4 crores. I don’t know in which planet is the difference around 33%. Calculate current value of the difference over 20 years term, it would be much less. Please do your calculations.
Also free advice might be good advice but only for a short term, with time it deteriorates. That’s why a layman investor needs continuous advice. This is not available freely.
I repeat again, % payment has ulterior motive to see the corpus grow, fixed payment may not have that. Fixed payment also has its need, but not for the normal middle class Indian.
You used the word “Ideally”, didn’t you? That answers it. Also, I strongly believe, after one starts earning, learning should be in the direction of earning more. This not only helps accumulate a larger corpus (much bigger than saving the 1% commission) but also helps in many other ways. Saving is important, but not at the expense of earning. For example, an IT professional fresh out of college would be more benefitted by getting certifications, etc that help him grow in career and earn more rather than learning to save 1% of his corpus.
I agree that retired investors, need not use MFD. Their motive is preservation, not high growth. This is where the fee only advisor comes, not for the normal middle class Indian.
You may or may not agree, but the costs are very much justified (if not pathetically low compared to criminally high). Also the fund house rarely pays MFD the commission it takes from investor in the name of paying MFD.
During covid everybody were struggling. This is where the MFD comes to aid. Post covid every fund went up, smallcaps went up more (They fell more too during covid, overall they made more money than other categories). Do look at the numbers. They are strong GREEN.
I completely agree.
Just speak to the MFD for few hours, eat their brains out and you will discover it is not very difficult to find decent guys. I agree, short term could be luck, that’s why look for long term record (atleast 1 decade, maybe more if available) and the reasoning behind it. It’s not very difficult to interview and find good MFD’s. Try it out, I’m sure you will find many.
This just sounds like sour grapes to me. I have read many of his articles over the years quite a while ago and they were all generally good and added value over something like VR. It was too late for me to act on them and now i can do my own work when needed.
VR is good too. And then need to use common sense and verify as always.
HDFC Flexi cap is already 8 % down over 10 or so years. 20 years is nothing, We start earning from 20s and investments should continue well into retirement. What people actually do could be different but for this category of people atleast % fees is just plain wrong in most cases.
Only a good portfolio manager can demand % fees if he can deliver returns over market. Else its just inefficiency.
Completely disagree as far as basic investment by retail is concerned, there is nothing to change. Just invest in simple things and manage allocation. We are not actively investing here. That’s another big reason to go with index funds for aam janta, simplicity is good but advisors will push complexity because people would continue to need them.
It will continue to grow anyway, just buy and hold diversified market through ups and downs. You are not actively investing here, which is left to fund manager or to index.
Alpha is possible over this, but that’s not what we are talking about.
Completely disagree again. Investing passively does not need this much work that its not worth it and by being in control oneself, one can have more confidence and understanding and also save a significant portion on commissions over time. This has no impact on work assuming minimal free time use, even on week ends.
You did not understand. Before covid small caps / value stocks / psu were all struggling and now they are the rage. This will pass too, its all cyclical.
Completely disagree again, speaking wont yield much to the avg joe.
I trade actively and can manage on my own, but from newbie point of view - i dont think they have capability to separate good from bad/mediocre.
If someone is completely helpless, happy to pay % fee after understanding its long term impact and can be helped against making mistakes, then only i think we can make a case for this.
Anyway, we will continue to disagree. If you feel strongly about this, perhaps open another thread and write what you feel like. I do not think OP asked for this nor has he asked anything in response to this - and so his thread is being hijacked.
I do not want to put any more time into this, good day.
I don’t know what is sour or sweet here. I’ve also read freefincal articles. Some of them are good others sour. Overall I found these were just to market his calculators, etc. Few of them added some value others just added confusion. Overall I will never follow someone who doesn’t walk his talk. Simple.
Couldn’t disagree more. The fund house/ MFD only make money when the investor makes money. The investor always has the option to reject a fund house and find some other. This is what makes it beautiful. You make money, I make money. Lets be happy.
An active fund purpose is to beat the index (Many do, few don’t. Its other way in large caps). The index fund, by definition, will never beat the index. Index funds are needed for a certain segment of investors, they are definitely not for aam janta.
Active funds are also simple. a smallcap fund and a midcap fund (Maybe 2 of both) is more than enough for a normal Indian investor. What is more important, is periodic review of the funds (Maybe 1 or 2 times a year, 1 hour every time) and the investment plan and the ability to stick to it during bad and good times. This where a good advisor comes in. They help in choosing and reviewing funds too.
Isn’t that the most difficult part. I’m talking about majority of investors who tend to panic. This is where they need help but what does social media advocate??? I’m waiting for a bear market, it would be fun to see social media experts and direct investors.
I agree. Passive funds don’t require any work. Why do you need to work when under performance is guaranteed. Work is required to try and outperform, Many pass, some fail. That’s why periodic review is needed.
I have better things to do on weekends than select funds and check them. That’s why I prefer outsourcing it. Some time has to be given even after outsourcing, but the major work is done by someone else. That too for a meagre fee. I find it a steal
I agree. Everything in life is cyclical. Over time every fund has its struggles and also sees glory. We have to live through both and at the end there is pot of gold waiting. Only in active funds the pot is slightly bigger.
The MFD job is to make sure the struggle is bearable and the investors completes the journey.
Good to know that. I’m also full time trader. I buy Nifty options.
Talk to both fee only planners and MFD. Even a newbie can get a good idea if the advisor presents facts and figures. Investing is not difficult, choosing a MFD is even more easy. Just keep your ears and eyes open and ask WHY to everything they speak. Not at all difficult (assuming the investor is not lazy).
I guess we have to agree to disagree. I entered the discussion with the intention that some investor (anyone) might read it and avoid the pitfall of following social media geniuses and direct MF without the emotional and mental makeup required for direct funds investing.
