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How to switch from Regular Plan to Direct Plan | CA Rachana Ranade - YouTube
Channel: CA Rachana Phadke Ranade
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Who gave you the permission to watch聽
YouTube on the tab right now? Really!!!??
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That's smart!!
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Hey folks, CA Rachana Ranade here and I聽
welcome you all to another brand new lecture,聽聽
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which is about understanding the聽
importance of direct mutual funds聽聽
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and how can you shift your mutual fund聽
investments from a regular plan to a direct plan.
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Well first let's try and understand, what is聽
the difference between a direct mutual fund聽聽
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and a regular mutual fund. Just in case,聽
if you don't know what is a mutual fund,聽聽
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then this is the video for you. Have a look聽
at it and then you will understand that there聽聽
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are two different types of mutual funds I can聽
say right, one is direct and one is regular.聽聽
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To help you understand the difference between聽
these two, I think there's a classic example聽聽
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of the movie, Phir Hera-Pheri. In聽
that, there is a hilarious scene聽聽
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where we have our own Sunil Shetty, Bipasha聽
Basu, Akshay Kumar and Paresh Rawal in the scene.聽
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If you can recall, Sunil Shetty is聽
being explained by Bipasha Basu that,聽聽
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we invest in some foreign company which聽
gives ekkis din mein paisa double scheme.
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and then, when he asks this question, Bipasha Basu聽
says that actually we invest in a foreign company,聽聽
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that foreign company doubles the money in聽
just nine days and then they pass it on to聽聽
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their investors, Bipasha Basu's company's聽
investors in 21 days and then Paresh Rawal聽聽
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is like, ''Arey phir hum woh directly foreign聽
company mein hi kyun invest nahi karenge?'' In聽聽
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simple words, Baburao is the most smart guy who聽
says cut out the middleman, cut out the person聽聽
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who is taking his commission between. Let's go聽
directly to the foreign company. Can I use that聽聽
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same example for direct versus regular? Answer is,聽
technically speaking yes. How? So, if I want to聽聽
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invest in a mutual fund, possibility number one, I聽
know anything and everything about it, I can do my聽聽
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own analysis. Why do I need an agent in between,聽
can't I directly invest in the mutual fund yes,聽聽
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like directly investing in the foreign company,聽
directly investing in the mutual fund. I can very聽聽
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well do that, who can opt for such I mean what聽
type of plan will that be, that will be like a聽聽
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direct mutual fund okay, but, if I am a person who聽
doesn't know really, which mutual fund suits me,聽聽
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which is better, should I go ahead with an聽
equity mutual fund or a debt mutual fund or what,聽聽
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I have many many more questions and I need someone聽
who will help me take a decision on that then,聽聽
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such a person generally goes with a regular mutual聽
fund. So, in simple words in regular mutual fund,聽聽
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you finally invest in a mutual fund but through an聽
agent who is going to charge you some commission聽聽
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and in a direct mutual fund ,you directly invest聽
in a mutual fund without any middleman in between聽聽
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and I hope now you can also correlate with聽
what Megh told me, I was the middleman for him聽聽
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and he directly approached the mutual fund聽
house, the key party which is his father.
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So let's quickly understand one more very聽
important difference between a direct plan聽聽
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and a regular plan. In direct plan, there is聽
no middleman, so comparatively it is cheaper聽聽
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for people like you and me, the investors.聽
If I am going ahead with a regular plan,聽聽
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there is a person who is like an agent, who will聽
guide you with the investment everything, but,聽聽
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is he going to do that free of cost? No, his cost聽
is born by whom? By the mutual fund house, but,聽聽
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ultimately who's going to bear that, people like聽
you and me, investors right. Now understand, this聽聽
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amount that we are going to bear is nothing but聽
the expense ratio. Now is it different for direct聽聽
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and regular plan, answer is, yes. I will give聽
you a practical example for that so let's say,聽聽
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Axis Bluechip Mutual Fund, for a regular plan,聽
the expense ratio is one point seven six percent聽聽
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and for a direct plan, it is just point four nine聽
percent. It's almost one point two five percent,聽聽
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higher expense ratio for a regular plan.聽
Now please tell me, higher expense ratio聽聽
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will lead to lower saving, correct. If my saving聽
is lower then obviously my ultimate return on聽聽
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investment is also going to be lower right. So I聽
will give you a simple example for that as well.聽聽
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Assume, I invest one lakh today and I don't聽
withdraw it, compounding effect, after 20 years聽聽
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okay, let's say, the CAGR is 15 % okay, but, with聽
reduction in expense ratio, I am not even saving聽聽
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1.25 percent, reduction in expense ratio聽
of only one percent will lead to a saving聽聽
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of almost 2 lakh 41,000 rupees. Isn't that聽
mind-blowing! I am investing only 1 lakh but, I am聽聽
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reducing my expenses, I am increasing my saving聽
by how much, by 2 lakh 41,000 rupees amazing.聽聽
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So let's also try to do this stat, assume聽
this video is being viewed by two lakh viewers聽聽
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and assume that only 10 percent of the viewers聽
understand the importance of this and they聽聽
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switch from a regular plan which is expensive to聽
a direct plan which is comparatively cheaper then,聽聽
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assume with only 50 000 rupees saved per head,聽
they will be saving in totality all the viewers,聽聽
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all the viewers put together will be saving how聽
much, hundred crore rupees! Amazing, isn't it?
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Convinced, yes, you want to switch from a聽
regular plan to a direct plan right away? If yes,聽聽
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understand, there are two ways to do that, one聽
is a traditional way and one is the smart way聽聽
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to do that. How is the traditional way? First,聽
let's understand in the traditional way you will聽聽
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have to first take a pen and a paper or maybe聽
you can jot it down on an excel sheet as well聽聽
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wherein, you will write down all the聽
mutual fund plans that you have invested in聽聽
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okay and for many people it might be like 50 plan,聽
60 plans, okay, just go on making a big list okay,聽聽
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then try to see which ones out of these are long聽
term, which ones out of these are short term, why,聽聽
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for short term you are going to pay higher聽
taxes, for long term you will comparatively pay聽聽
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lower taxes. So everything you'll have to do as聽
a manual calculation, you will also have to check聽聽
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out of these 50-60 whatever, on what or on which聽
schemes an exit load is applicable on which it is聽聽
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not applicable correct. Once this entire process聽
is done, are you done? No, then starts the process聽聽
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of selling, then starts the process of investing聽
and then you'll be really tired so is there any聽聽
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other way to do that? Yes, that's what we are聽
going to discuss in the next section of the video.聽聽
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Now let's understand the smart way to switch from聽
regular mutual funds to direct mutual funds. You聽聽
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remember in the old traditional way you required聽
to write down each and every mutual fund? No, now聽聽
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that is not required in the smart way, how? Just聽
download the IND money app. What it does is that,聽聽
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it auto detects your mutual fund investments after聽
you give certain permissions to the app and it聽聽
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will pull all your mutual fund investments in this聽
single app. What does it show? Okay, all these are聽聽
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the different different mutual fund investments聽
that you already have mirae asset, whatever,聽聽
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don't worry this is not my portfolio, this is聽
just an example portfolio okay, then let me聽聽
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give you an example of axis focused 25 mutual fund聽
okay. Now, once you tap into this, the app itself聽聽
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will show you that if you switch from a regular聽
plan to a direct plan then, how much money will聽聽
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you save? That is also very clearly given. Then聽
comes a very amazing feature which is known as a聽聽
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switch calendar, now what is that? I will quickly聽
tell you, here it shows in 2019, you have been聽聽
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making SIPs since January for this access mutual聽
fund okay, right now we are in which year, 2021,聽聽
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so obviously, whatever money you have invested聽
in 2019, as on date, it falls into the long聽聽
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term category, why long term? One year has been聽
completed okay, so any investment, once one year聽聽
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is completed falls into the long term category聽
and for that taxation is comparatively lower.聽聽
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Also, one more point, if it's a long term thing,聽
more than 12 months, your exit load will also be聽聽
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waived off right. So 2019 , what does that tell聽
you, it is into the long term category, exit load聽聽
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is zero ,you can switch bindas, from what to what?聽
From regular to direct. Now let me check what is聽聽
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the scenario for 2021. For 21, it says wait don't聽
do a full switch just do a partial switch because,聽聽
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right now we're in July, so, last year, from Jan聽
to July, whatever I have done that might have聽聽
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completed one year, but, assume in December 2020,聽
if I have made some investment, as on date it has聽聽
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not completed one year, so that installment will聽
fall in the short-term capital gain tax category聽聽
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and if I switch that as well, that might also聽
attract an exit load. Let's check what happens聽聽
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for 2021, here also you will see that 2021 also聽
it says, no don't switch, why, same old reason,聽聽
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short term capital gain and exit load might be聽
attracted so the app says wait don't do that.聽聽
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Once I am done with this, very amazing, it shows聽
that ideally you should be switching how much聽聽
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and how much gain you will have, how much tax you聽
will have to pay on that, everything is directly聽聽
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calculated by the app itself okay. Exit load is聽
zero, that is also what you can see on the screen,聽聽
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once you press continue here then, what happens聽
is that you go on to the next screen wherein,聽聽
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it just says that you are one step away from聽
saving whatever amount of rupees depending聽聽
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on your investment then, you just have to click I聽
agree and then click on confirm. Once you do that,聽聽
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then what happens, it says that yes, you have聽
successfully switched from your regular fund聽聽
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to a zero commission direct fund. One important聽
point here is that, you have switched what, your聽聽
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upcoming SIPs okay, What about your original bank聽
mandate that you are given, that is still alive,聽聽
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for that what you have to do is you will have聽
to cancel that okay and then it will serve the聽聽
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purpose okay. Now what you have to do is that, go聽
on to the next screen, you will just have to hit聽聽
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continue, once you do that your final screen will聽
come up which says that okay, confirm SIP order.聽聽
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Once you say okay and it says done. Well like I聽
mentioned is IND money the only way, no, you can聽聽
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go ahead with the pen and paper method, you can go聽
ahead with the excel method or you can also go to聽聽
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the respective websites of which, CAMS, K fintech聽
the respective AMC and then go ahead with the聽聽
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switch option okay, but then, again the problem聽
is that, right now till date you are done okay,聽聽
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right now you identified already there are some聽
SIP installments which are still in the short聽聽
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term category, then what, you'll have to do a聽
manual review again, on a monthly basis, on a聽聽
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quarterly basis whatever, but if you want to ease聽
out your efforts what IND money app does is that,聽聽
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it also notifies you that okay, these are聽
additional SIPs, these are the additional聽聽
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installments which now fit into the long term聽
category, which now will not attract any exit load聽聽
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if you switch from regular to direct. So I聽
felt that it was a useful feature that they聽聽
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have added in the app and I think that will聽
surely ease out your investment methodology.聽聽
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Well I feel this video gave answers to a lot聽
of questions which were haunting your mind,聽聽
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which were like what is the exact difference聽
between direct and a regular mutual fund.聽聽
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Number two, if I decide to switch from a聽
regular to direct, then, how do I do that.聽聽
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Number three, how can I minimize the cost of聽
switching, like where my taxation will be less,聽聽
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when will the exit load be zero, all these聽
questions I tried to answer in this single video.聽聽
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If you felt that yes, some value was added through聽
this video, don't forget to share this video with聽聽
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your friends till then take care switch your聽
mutual funds if necessary, Jai Hind and bye.
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