Switching from existing investments (read ‘units’) to direct scheme(1ST JAN, 2013)

POSTED BY bharat shah ON January 3, 2013 10:56 pm COMMENTS (6)

and now direct mutual fund NAV started w.e.f. 01-01-2013. i read in some local news papers, the AMC (may not all, but some) increased the exit load up to 3% to discourage the investors to switch their existing units to direct NAV MF schemes. however i think , it may be for investments done for less than 1 year in most of equity mf schemes , and that too can not be applied retrospectively , i.e. earlier than the notification date. so for such switch, only applicable expense could be the security transaction tax if already held for more than one year . what is your opinion?

6 replies on this article “Switching from existing investments (read ‘units’) to direct scheme(1ST JAN, 2013)”

  1. Thanks for pointing this out. I had tough time purchasing units because I had to find the broker code for direct transactions and it took me a while to figure it out. Never had to bother earlier!

    The document says
    Direct Plan shall have a lower expense ratio excluding distribution expenses, commission, etc and no commission for distribution of Units will be paid / charged under Direct Plan

    so we will have to wait until they declare the actual ratio. Maybe 6 months

  2. bharat shah says:

    Further i found that prominent AMC s already issued the ADDENDUM for introducing Direct schemes in addition to existing schemes well before dt.01-01-2013 , and they have already stated the applicability of exit load from Existing Scheme to Direct Scheme and vice a versa , which are in brief as under:
    1. Direct investment in existing schemes before effective date 01012013 can be switched to Direct Scheme without any exit load, but investment with ARN no. i.e. through agent/broker can be switched with exit load, as applicable.(NAV would apply as on date of switch).
    2. Direct investment in Direct Schemes done before or after effective date can be changed to Existing Scheme without any exit load.(anando broker/agent!)
    i think , the expense of STT is inevitable for such switch. it could be compensated within a year time.

  3. of course that is to be expected. The exact quantum of difference is not clear

  4. bharat shah says:

    @ashal jauhri
    yes, they are the authority, but somebody (read ‘interested’) should ask them to make a call.
    otherwise they should have make it clear earlier, as they already introduce ‘direct’ investment as a option long back.
    @ Free Financial Calculators
    as i checked and found that the NAV of direct scheme is a bit more than other.

  5. Yes you are right. The exit load only applies to purchases held for less than a year

    However the quantum of difference in NAV or expense ration bet direct and old schemes is not yet clear.

  6. Dear Bharat, let the wise men of SEBI make a call on this issue.



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