For HDFC Prudence:
Dividend option Direct Plan NAV is 36.709 now on 11-8-2017.
Dividend Option Regular Plan NAV is 31.547 also now on 11-8-2017..
Both Schemes are giving a Monthly Dividend of 0.30 Rs/Unit last many months.
So with Rs.1 Lakh Under Regular Plan, I can buy 3169.874 Units.
while for Rs.1 Lakh Under Direct Plan, I can buy only 2724.128 Units.
Assuming the Monthly Dividend remains same at 0.30 Rs./Unit over 1 year,
My Dividend for a year under Regular Plan will be Rs.0.30 X 12 Months X 3169.874 Units = Rs. 11,411.55 .
My Dividend for a year under Direct Plan will be Rs.0.30 X 12 Months X 2724.128 Units = Rs. 9806.86
So by buying Direct Plan I stand to lose Rs.1604.69 in an year (and every year later) due to the difference in Dividends.
So I am wondering how Direct Plan will be more beneficial to me (A Retiree) as advised by many of my friends?
May I request your kind help and guidance? Why am I being advised that Direct Plans are more beneficial as they incur less expenses?
Thanks & Regards,
S.H.Ayyer
6 Answers
Dear Mr Ayyer,
Very good and valid question indeed!
Suggest you to kindly go through below articles ;
Article - 1
Article - 2
Article - 3
However, the Direct Vs Regular - Growth plans, the advantage can be easily visible and straight forward, unlike the calculations and limitations that Direct plans - Dividend option has (as of now, as they are relatively new to the market..)
Thanks so much, Mr.Srikanth, for your kind and immediate response. I really appreciate it.
I am really impressed by all the contents in all your posts. I find them extremely useful. I will certainly go thru' the articles mentioned by you.
At this point in time, given the facts as on today, for my investment in the Dividend option today, I suppose you agree with me that it is better for me to go for Regular Plans instead of Direct Plans.
Requesting your confirmation because, I was about to invest more today in Direct Plans (having heard & read so much about them from many sources ) but suddenly I stopped and checked out the Dividend History and was confused.
Thanks so much for your wonderful contributions and also timely guidance to Senior Citizens like me.
Warm regards,
S.H.Ayyer
Dear Mr.Sreekanth,
Now I have read up the 3 articles for which Links were provided by you in your answer.
THANKS SO MUCH for the really relevant and meaningful articles with reference to my question. I am really happy to note that you have a good reference database of articles for immediate access.
Yes. These articles answer my original question fully.
So, it is now very clear to me that investors (more so, retirees like me) looking for Dividend options should stay far away from Direct Plans.
While the articles talk about the reasons being SEBI guidelines etc. I wonder what could be real reason behind these SEBI guidelines, which indirectly push the investors like me away from Direct Plans and towards Regular Plans. Any thoughts? :-)
Thanks a lot again for immediately providing these excellent references.
Warm regards,
S.H.Ayyer
Dear Mr Ayyer,
Though the facts suggest and justify your viewpoint, let's not generalize this assumption. There can be few other MF schemes where dividends of both Direct & Regular plans may be more or less same.
May be, SWP (Systematic Withdrawal Plan) of Direct plan - Growth, makes sense, if a retiree/senior citizen is looking for fixed and periodic income..May I know your opinion on this?
(Thank you for your appreciation and kind words!)
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