Thinking of investing in mutual funds? Don’t miss this emerging approach that could save you lakhs, offer greater control, and put you on a smarter path to wealth creation!
The mutual fund industry today is abuzz with headlines – direct plans are capturing a significant share of SIP accounts, renowned players are launching low-cost index funds to tap into the market growth story, and passive funds are fast emerging as investor favourites etc.
The rise of direct and low-cost fund models is no longer just a trend; it’s becoming a significant shift in the way Indian investors approach wealth creation.
A decade ago, most retail investors relied heavily on intermediaries including distributors, agents, or bank relationship managers to invest in mutual funds. While that model served its purpose, it often came with higher expenses and limited transparency. Fast forward to today, and more investors, especially younger, tech-savvy individuals are turning to direct plans and low-cost index funds for a better deal.
The appeal is clear. Direct plans cut out the middleman and offer lower expense ratios, which over time can lead to significantly higher returns, especially in long-term SIPs. For example, a difference of even 1 per cent in expense ratio over 15-20 years could mean lakhs of rupees in saved costs and earned gains.
What’s driving this change? Digital platforms, financial literacy campaigns, and rising awareness about fund structures have played a major role. Today, opening a direct mutual fund account is as simple as installing an app and completing e-KYC. Investors are also becoming more cost-conscious. Many are actively comparing TERs (Total Expense Ratios) and asking smarter questions; something unheard of a few years ago.
Adding fuel to this trend is the recent buzz around Jio BlackRock’s entry into the mutual fund space. Their proposition – Rs 500 minimum investment, fully digital onboarding, and low-cost index strategies could be a game-changer, especially for first-time investors in tier-2 and tier-3 towns. The model is simple: offer plain vanilla products with low fees and easy access. And it’s catching on.
Of course, low-cost doesn’t mean low quality. In fact, many index funds and ETFs have outperformed actively managed peers in recent years, especially in developed markets. While Indian fund managers have still managed to beat benchmarks in certain categories, the gap is narrowing.
This evolution isn’t about replacing advisors or active funds; but about giving investors more choice and control. As costs come down and digital access improves, expect the direct and low-cost model to become a mainstay in India’s mutual fund journey.
After all, in investing, what you don’t pay often matters just as much as what you earn.
Disclaimer: The article is for informational purposes only and not investment advice.