DIY investors lose edge in direct mutual fund market, shows data

Guided assets grow faster than self-managed ones

The share of guided investments in mutual fund (MF) direct plans has risen faster than self-driven investments over the past 18 months.

 

Those investing in direct schemes through investment advisers or portfolio management services (PMS) providers have seen their monthly average assets under management (AUM) rise 64–65 per cent since January 2024, the earliest available data with the Association of Mutual Funds in India.

 

The do-it-yourself (DIY) investors picking direct schemes without such advice have seen their assets rise 47 per cent during the same period, shows the latest data as of June. The overall AUM grew 41 per cent during this period.

 

The direct route allows for MF investments without a distributor commission. The industry classifies such inflows as coming in through investment advisors, PMS providers, and DIY investors. The first two help investors manage allocations for a fee that investors pay for their service. The DIY investor picks his/her own funds and pays no fee. The relatively higher growth of guided investment assets gains significance in light of muted market returns and higher volatility in recent times.

 

Investors who are new to the financial market can benefit from guidance, which helps them avoid panic during periods of volatility, said investment advisor-turned-distributor Jayant Vidwans. Those investing in MFs for the first time often look to stop investments during a decline as they may be uncomfortable with negative returns, and require education to understand that markets can give poor returns for extended periods, especially in funds that focus on specific themes which may be going through an extended downcycle, he suggested. 

 

“I have seen periods when systematic investment plan returns were negative for three to five years,” he said.

 

The share of investment advisors and PMS providers in direct schemes remains lower at 15.8 per cent of the total direct MF investments of ₹35.4 trillion. But they may have been more resilient amid geopolitical tensions, tariff wars, and a slowing economy.

 

The size difference between those coming through the guided route and DIY investors may affect the availability of advice, suggested Dhirendra Kumar, chief executive officer (CEO) of MF tracker Value Research. Those with a larger corpus tend to attract investment advisors and PMS players, while others typically depend on technology platforms. It may not be worthwhile for service providers to attend to the needs of those with a lower corpus, he suggested.

 

“The ticket size of the self-guided investors is very small,” he said.

 

Another reason for the shift could be that a number of wealth managers have begun to move clients from regular plans to direct plans under their PMS division, according to an MF CEO. This move is to ensure clients who may wish to avail of the cost difference are not lost.

 

“If you look at the difference between a regular plan and a direct plan, the difference is as much as 1–1.5 per cent,” he said.

 

The PMS segment continues to make a small amount on the assets which remain within the organisation. The wealth managers hope to make up for volume what they lose on the lower fee, according to the CEO.

 

Registered investment advisers manage ₹4.7 trillion of direct MF assets, PMS providers manage ₹90,000 crore, while DIY clients manage ₹29.8 trillion, shows industry data.