Direct mutual funds have gained popularity, offering investors a way to save on commissions and manage their own money. On paper, it sounds great—cutting out the middleman and controlling your investments. But when we examine self-managed portfolios, the reality often paints a different picture. Over 70% of these direct portfolios struggle to meet their intended goals, let alone achieve their goals. So, what’s really going wrong?

The Allure of Going Direct

Direct mutual funds offer lower expense ratios, no commissions, and the freedom to hand-pick investments. For many, it seems like the smart choice. But investing is more than just saving on fees. It requires strategy, discipline, and, most importantly, alignment with long-term goals—areas where many DIY investors falter. True, people save on commissions through direct plans but only when they are able to build something.

Common Mistakes in Direct Investing

Here are the typical pitfalls we see in self-managed portfolios:

  1. Chasing Top-Rated Funds: Investors select funds based on performance rankings without understanding whether they suit their financial goals or risk profile.
  2. Overloading on Funds: Starting with 10-15 schemes and adding more, leading to an unfocused, overlapping portfolio.
  3. Misguided Diversification: Adding large-cap, mid-cap, small-cap, and even micro-cap funds randomly, thinking it covers all bases, without a cohesive strategy.
  4. Reacting Emotionally to Market Dips: Halting SIPs or selling investments when the market corrects or funds underperform, driven by fear rather than logic.
  5. Sectoral Fund FOMO: Investing in niche or sectoral funds without fully grasping market trends or growth potential, which can lead to significant losses.

The Cost of Cutting Costs

While direct plans save on commissions, they often cost more in the long run. A portfolio is only as effective as the strategy behind it. Without expert guidance, many portfolios bleed during market corrections, failing to meet their long-term goals. In the quest to save a little on commissions, many investors miss out on greater potential wealth.

Why 70% of Direct Portfolios Struggle

Managing a portfolio requires more than just picking funds. It demands time, strategy, and regular monitoring. Without a structured approach, direct portfolios often drift aimlessly. Emotional biases, knee-jerk reactions, and lack of reviews lead to underperformance.

The Benefits of Investing Through Professional Advice

Here’s why working with a financial advisor can make a difference:

  • Personalized Strategy: Advisors help align your investments with your unique financial goals, risk appetite, and time horizon.
  • Disciplined Approach: Advisors ensure that you stick to your financial plan, helping you avoid emotional reactions during market volatility.
  • Regular Portfolio Reviews: Your portfolio is monitored and rebalanced regularly to ensure it stays on track with your goals.
  • Expertise in Fund Selection: Professional advisors analyze market trends, fund performance, and suitability, guiding you to make informed choices rather than just chasing returns.
  • Tax and Financial Planning: Advisors don’t just help with fund selection; they also provide insights on tax planning and broader financial decisions to maximize wealth.
  • Long-Term Focus: With an advisor, the focus remains on long-term wealth creation, preventing costly mistakes that can derail your financial vision.

Conclusion: Is Direct Really Better?

Direct plans are great for informed, disciplined investors with time and expertise. But for most, the real value lies in professional advice. Saving on commissions might feel like a win, but when portfolios lack strategy, the cost of poor decisions can be far higher. In the end, it’s not about cutting costs, but about building wealth—something that requires more than just eliminating a middleman.

Don’t compare apples to oranges and save on a few seeds. Building wealth needs strategy, discipline, and the right guidance.