Effect of mutual fund ‘DIRECT’ schemes.

3 Jan

As on Jan 3 2013

It is only 3 days since their launch.

As of now http://www.amfiindia.com/spages/NAV1.txt reflects yesterday’s(2 Jan 2013) NAVs of all schemes.

For example if you take “Franklin India Blue chip Growth” and “Franklin India Bluechip Fund- Direct – Growth” as on Jan 2 2013.

Scheme: NAV
Franklin India Bluechip Fund- Direct – Growth 239.4858
Franklin India Bluechip Fund-Growth 239.4819

The difference of 0.39 paise in 2 days.

All it means that if you have invested the same amount in both “Direct” and “AGENT” schemes your “AGENT” scheme woud have grown *less* by 0.39 paise in 2 days or 0.00162% in 2 days if I assume 52 weeks and 5 days per week it would be 0.2% per annum. Over years this 0.2% would make significant difference.

This difference would be directly proportional to “Churn” of the schemes.
If you invested in a “AGENT” scheme and that scheme has too many entry and exit of investors you will see the NAV affected accordingly as “AGENT COMMISSIONS” are paid from common pool.

“DIRECT” schemes have no such problem.

So “DIRECT SCHEME” NAV would be higher over time.

Be Aware when MF Advisor says “Cheap NAV” would make you buy more units(It is like an individual feeling rich by changing 1000 Rupee Note to 100 ’10’ rupee notes).

Prosper by being your own “Advisor” by using simple and neutral tools(Fund selector http://www.valueresearchonline.com/funds/fund_selector_quick.asp) like “ValueResearchonline.com”.

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