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Direct and Regular mutual fund plans come with different features and perks that an investor must fully understand before opting for the right choice.
Each mutual fund carries unique features and benefits that investors can dig into, based on their budgets and financial goals. (Representative Image)
Mutual Funds are common investment tools for individuals with a good risk appetite and who eye strong returns over a long period. All mutual funds come in two different forms: direct and regular, each carrying unique features and benefits that investors can dig into, based on their budgets and financial goals.
Investors approaching the market with money in hand and sufficient risk tolerance should be able to differentiate between the direct and regular plan and arrive at the right choice.
Difference Between Direct and Regular Mutual Funds
High Returns: For any investor, the first point to consider is the strength and stability of the returns and whether they align with your desired goals. Any direct mutual fund offers higher returns than a regular mutual fund because of the expense ratio involved.
Expense Ratio: The expense ratio, which is the fee charged by the mutual fund company, is usually higher in regular mutual funds. To understand with an example: if a scheme charges 0.2 per cent as an expense ratio, 0.2 per cent of AUM is used to cover the operating and administrative expenses involved with the fund.
While investors may opt for mutual fund advisors to allocate their assets wisely, the fee paid to the advisor is directly or indirectly deducted from the investment amount. The higher the commission, the worse the expense ratio. In direct plans, investors are able to eliminate the commission fee and other operational expenses.
Higher NAV: The Net Asset Value, or NAV, is higher in direct mutual funds. The NAV represents the value of one unit of a mutual fund, ascertained by dividing the total assets owned by the fund and the number of units held. While mutual funds allocate assets in debt instruments, the NAV can improve or regress based on the fees paid to the agents, removing who could also reduce the chances of being misled.
Control: With direct mutual funds, you are in control of your own destiny. However, with power comes extra responsibility. It becomes that much more necessary to do your homework on the past history of a mutual fund and its ability to ride over market volatility when you opt for a direct mutual fund above its regular version.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
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Delhi, India, India
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