Are direct mutual fund plans better than regular plans?

I am 23. I started investing through SIPs last month and my horizon is 25 years. I am investing Rs 5,000 each in Motilal Oswal Nasdaq 100 FoF, Parag Parikh Long Term Equity, Mirae Asset Emerging Bluechip and Axis Bluechip. I also invest Rs 3,000 each in Kotak Standard Multicap, Mirae Asset Large Cap, DSP Mid Cap, Axis Mid Cap, Axis Small Cap and Franklin India Feeder US Opportunities. I also invest Rs 4,000 in SBI Small Cap and Rs 2,000 in ICICI Prudential US Bluechip Equity. I am planning to start an SIP of Rs 3,000 in Tata Retirement Savings, Rs 2,000 in ICICI Prudential Bluechip and Rs 3,000 in DSP US Flexible Equity. I also have Rs 3.5 lakh in an FD that will mature in two years and the money will be reinvested. Are direct plans better than regular plans? Have I selected the right funds?

Vidya Bala, Co-Founder, replies, “Go for direct plans if you can monitor your investments well or use the service of a fee-based adviser. However, you hold too many funds. It will be difficult for you to monitor them after a point. Besides, too many funds can lead to duplication and dilution in performance too. Use existing funds such as Parag Parikh Long Term Equity, Kotak Standard Multicap and DSP Midcap for fresh investments and consider adding some banking & PSU and corporate bond funds for debt. Gradually reduce international funds to just one US index fund and keep just 1-2 mid and small-cap funds and one large-cap fund.”

I have been investing in mutual funds since 2015. My goal is to repay a Rs 20 lakh loan in six years and accumulate Rs 60 lakh in 12 years for my daughter’s education and marriage. I also want to create a retirement corpus of Rs 3 crore in 23 years. So far, I have invested Rs 20 lakh in EPF, PPF and NPS. I have Rs 3 lakh in mutual funds and Rs 2 lakh in stocks. I invest Rs 4,000 each in Axis Focused 25, HDFC Small Cap, Parag Parikh Long Term Equity and Rs 1,000 in UTI Mid Cap. How do I move forward to achieve my goals?

Raj Khosla Founder and Managing Director, says, “The retirement plan will need a monthly investment of Rs 35,000 in diversified equity mutual funds through SIPs for the next 23 years. Loan repayment should be evaluated basis interest rate scenario and can be postponed. Continue investing in EPF and PPF as these offer fixed guaranteed returns. Increase SIP amounts at regular intervals. Recommended new funds are SBI Large & Midcap, Axis Midcap and Kotak Standard Multi-Cap. Manage redemptions from funds and withdrawals from EPF and PPF to meet your daughter’s goals and loan repayment.”

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