What is the difference between regular and direct plans of mutual funds?

Deepak Krishnan, Chennai

When it comes to investment objective, fund managers, portfolios and approach to investing—there is no difference between the regular and direct plan of a mutual fund scheme. In case of a direct plan, charges like annual expenses are lower because it does not pay the distributor a fee or commission. This is because in case of direct plan, you invest the money ‘directly’ with the fund house, without going through a broker or agent. Thus, the direct plans of equity funds can be cheaper by as much as 1 per cent in their annual expense ratios. This makes them suitable for investors who can manage their investments on their own. However, if you are new to mutual fund investing, it may not be a bad idea to take the services of a distributor and therefore, invest in regular plans. Over time, as you gain more knowledge and feel confident about managing your investments independently, you may consider switching to the more economical direct plans.

olmdesk@outlookindia.com