A Decade of Direct Mutual Funds: Investors Amass 1000s of Crores of Extra Returns : ET Money

Direct Mutual Funds officially completed ten years of existence on January 05, 2023, allowing Indian investors to earn 1% more than regular funds by saving on commissions. To mark this occasion, ET Money, one of India’s largest wealth tech platforms that helps Indians manage more than Rs.30,000 crores of mutual fund investments, has released a study that shows this landmark reform's impact on investors' wealth.

The study indicates that Indian investors who opted for direct mutual funds in the last 10 years have collectively earned thousands of crores in extra returns. The results are based on the analysis of return differences between direct and regular plans for both SIP and lumpsum Investments for key Equity, Debt, and Hybrid categories.

The study found that, on average, a Rs. 10,000 SIP in Direct Equity Funds started a decade ago resulted in a corpus of Rs. 28.1 lakhs against Rs. 26.6 lakhs in regular plans, thereby earning an extra Rs.1.5 lakhs. A lumpsum investment of Rs. 5 lakh at the same time delivered an average of Rs.21 lakhs in regular, whereas Rs. 23.09 lakhs in direct plans, earning an extra Rs.2.09 Lakhs or 10% extra returns.

The funds in the Hybrid and Debt categories, too, created an excess wealth of 6% and 3% for SIP and 11% and 6% for lumpsum investments.

The impact of these excess returns has resulted in over Rs.183 crores of extra wealth for investors on ET Money alone in 4.5 years since it started offering Direct Mutual Funds on its platform. And with around Rs.18,16,920 crores (45% of the Indian Mutual Fund industry’s AUM) in Direct Plans, the total money saved on commissions and thus added to the returns of Indian investors would have been 1000s of crores.

As per ET Money, the top 5 AMCs in terms of extra wealth created on its platform are - Axis Mutual Fund, Mirae Asset Mutual Fund, Quant Mutual Fund, Kotak Mutual Fund, and ICICI Prudential Mutual Fund.

On completion of this industry milestone, Mukesh Kalra, Founder & CEO of ET Money, said, “Direct plans remove the bias of commission and its introduction has been the single most effective initiative to curtail miss-selling in the MF industry.We feel privileged to be one of the first platforms to help Indians access direct investment plans at scale. Through the use of powerful decision-making tools and hyper-personalized investments via Genius, we aim to significantly enhance the wealth-creation journeys of our users by compounding returns and increasing additional returns from Rs 183 crores to at least Rs 1,000 crores over the next 5 years.”