Generally, most of the schemes of Mutual Fund has two alternative plans to buy i.e …. Direct Plan & Regular Plan.
Direct Plan is that option of Mutual Fund, which we buy directly from mutual fund company. But Regular Plan is another alternative option of Mutual Fund, which we buy through adviser or broker or biro or intermediary.
Once upon a time, there was no existence of Direct Plan in Mutual Fund and only Regular Plan was available to buy. SEBI (Securities and Exchange Board of India) has done the reform to launch Direct Plan of Mutual fund in the year 2012.
Direct Plan of Mutual Fund is always better than Regular Plan of Mutual Fund. Please go through the following points to understand the differences between the two plans……
· When we invest in Direct Plan, we actually deal directly with the AMC (Asset Management Company) but in case of Regular Plan we deal through adviser or broker.
· Mutual Fund Company pay some fees to the adviser or broker in the form of commission in case of Regular Fund. But in case of Direct Plan no question of commission as there is no intermediary.
· As no commission is payable in case of Direct Plan, the annual return of Direct Plan of Mutual Fund is more than Regular Fund by upto 1 %.
· As no commission is payable in case of Direct Plan, Expense Ratio of the Fund House is less in case of Direct Plan. But Expense Ratio is more in case of Regular Plan due to commission to broker.
· Market research and hard work is involved in case of Direct Plan - investor regarding choosing the right fund. But Regular Plan - investor go as per advise of broker and so no headache or hard work is required by investor.
Example :
1) DSP BlackRock Micro Cap Fund – Direct Plan:
This scheme has annual return of 20.5 % and Expense ratio of 2.04 % as on date.
2) DSP BlackRock Micro Cap Fund – Regular Plan:
This scheme has annual return of 19.9 % and Expense ratio of 2.4 % as on date.
So, you can understand the difference.
Happy Investing !!!
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