Mutual Fund direct plan vs regular plan

There are two ways of investing in Mutual Funds.

Regular

when you buy Mutual Fund Through a Distributor or Adviser, you are allotted Regular plan of the Mutual Fund.

Direct

when you invest in the mutual funds directly through the Mutual Company Web site online, through the Office of the Mutual Fund company or through Registrar and Transfer(R&T) agent like Cams or through Mf Utilities, then the Direct Plan is allotted to you.

Difference between Direct and Regular plan

The charges of the Regular plan is on average 0.50 and 0.75 percent more than that of the Direct plan as the mutual fund company has to pay commission to the adviser or distributor for their service.

Reasons for difference in the cost 

In Sep 2012, SEBI came out with the concept of the direct plan for the benefit of the investors who had sufficient knowledge and wanted to take care of their investment needs themselves instead of going for advisers or distributors. As in direct plan, Mutual Fund companies don’t pay any commission, so the expense ratio of the direct plan is lower.The NAV of a direct plan is slightly higher than a Regular plan.

Who should opt for Direct Plan?

It is meant for DIY(Do It Yourself) kind of investors, who are financially aware and can take an informed decision. If you don’t have an idea of financial jargon, then it is always better to go for the Regular plan through an authorised advisor, as you will get professional advice as per your need. But if you can do a little bit of reading and are willing to take the risk then going for Direct plan makes lots of sense.

you can also read about of basics of mutual funds here-learning-mutual-fund-basics