Mutual fund investing: What are regular and direct plans?

Mutual fund investing: What are regular and direct plans?

• By Staff Writer

Mutual fund investing: What are regular and direct plans?

• Two variants of a mutual fund scheme

  Mutual fund houses offer their schemes in two options- regular      plan and direct plan. The regular plan includes commission or brokerage paid out to the mutual fund distributor. The direct plan does not factor in such costs and the benefits are directly passed on to investors.

• Who offers which one?

While direct plans are directly offered by the mutual fund house, regular plans are bought through intermediaries or distributors like Independent financial advisers, banks or NBFCs.

• ​NAV of one is higher because...

NAV of direct plan is higher than regular plan because they save on commission. Direct plans have no commissions and brokerage whereas for regular plans, commission or brokerage is paid to the intermediaries.

• Expense ratio of one is lower...

A direct plan has lower expense ratio because there is no commission involved. For a regular plan, the expense ratio is higher since there are commissions that need to be paid.

• Returns are higher for...

The return of direct plans are higher due to a lower expense ratio as compared to the regular plans. Saving on commissions is mainly what enables these relatively higher returns in direct plans of mutual fund schemes.

• Also note...

While these two types are separate plans, the overall portfolio of the mutual fund scheme remains the same.

Note: - As every caution has been taken to provide our readers with most accurate information and honest analysis. Please check the pros and cons of the same before making any decision on the basis of the shared details.