DIY Investors Losing Their Edge in Direct Mutual Fund Plans

Why “going it alone” may no longer be the best path for MF investing

Recent data from the Association of Mutual Funds in India (AMFI) and industry reports reveal a surprising trend: investors who pick their own mutual funds via direct plans without professional guidance are being outpaced by those who invest via advisers, even though direct plans are supposed to cost less and offer higher returns.

The numbers in focus

• Guided investments (through advisers or PMS providers) into direct mutual-fund plans have grown by around 64-65% since January 2024 (for 18-month period) according to AMFI data.

• In contrast, DIY (self-directed) investors in direct plans grew their assets by only about 47% in the same period.

• Meanwhile, the overall AUM (assets under management) of mutual funds increased ~41% during this same time.

  
  

What’s going on? If direct plans cost less (they avoid distributor commissions) and are accessible to everyone, why are DIY investors losing ground?

Direct vs Regular: The fundamentals

Here are some basics:

• A “direct plan” of a mutual fund is one where the investor buys units directly from the asset-management company, without using a distributor/agent. This means a lower expense ratio (since no distributor commission) and accordingly should give higher net returns.

• A “regular plan” involves the investor going through a distributor/agent; the scheme’s costs are slightly higher (to cover the intermediary) which slightly lowers investor returns.

• Historically, many investors assumed “direct plan = better returns, regular plan = old school” — because of cost-advantage. But cost is not the only factor.

  
  

Why guided investors are now gaining an edge

Several reasons help explain why investors with advice are outperforming purely DIY direct investors:

1. Behavioural discipline & review – Professional advisers or PMS providers often help set goals, review portfolios, rebalance, avoid emotional decisions (like panic switches) which DIY investors tend to struggle with.

2. Fund selection & allocation – Choosing funds is not just about picking the highest returns of last year; it requires assessing risk, suitability, portfolio mix, time horizon. DIY investors may pick based on short-term performance or hype.

3. Access & network – Advisers and PMS players may have access to research, institutional-level tools, or better execution, which can slightly tilt the edge.

4. Scale & momentum – As guided inflows grow, there may be network effects: advisers attract more assets, offer enhanced services, leading to faster growth. The 64-65% rise suggests these guided routes are scaling.

   
   

What this means for the investor

• If you are a confident, well-informed investor who can monitor your portfolio, rebalance, resist emotional reactions, then choosing a direct plan and going DIY may still make sense.

• However, if you prefer having someone guide you—someone to set goals, review your portfolio, manage discipline—then even within a “direct plan world”, the structure of advice + direct cost-benefit may be optimal.

• Cost advantage alone (lower expense ratio) isn’t sufficient to guarantee superior outcomes. The service dimension (advice, discipline, review) is emerging as a critical differentiator.

• The data suggests that even though direct plans eliminate distributor cost, the value offered by guidance is still proving meaningful. That means the investor’s capability and willingness to self-manage matters a lot.

Key questions to ask yourself

• Do I have the time, temperament and skill to monitor my portfolio, avoid behavioral mistakes, and stay invested through cycles?

• Am I choosing funds based on a sound rationale (goal, horizon, risk) or merely chasing last-year’s winners?

• Do I have a process (review, rebalance, stop-loss, escalation) or am I just “set and forget”?

• Would I gain from professional support (even if it means paying a fee) that might enhance discipline and outcomes?

For investors, the choice between direct and regular (or DIY vs advised) must hinge not just on cost but on capability, goals, discipline and structure.