Mutual fund investments are on the rise in the present day. They are of two types — direct plan and regular plan.
What’s the difference between direct plan and regular plan?
An immediate plan is the one that is bought directly from the mutual fund’s company. On the other hand, when one purchases a plan through a mediator like a broker or an adviser, it is known as a regular plan. In the latter one, the mutual fund company pays commission to the mediator for bringing a client. So, generally it is considered that a regular plan costs more than the direct plan; this is the basic difference between these two plans.
Eventually, one has to pay more for a regular plan than a direct plan. The reason is evident that the company has to pay a commission to the mediator due to which a regular plan costs high. The expense ratio of both the plans is different. While the direct plan has a low expense ratio, a regular plan has a comparatively higher expense ratio. But the net asset value (NAV) of the direct plan is higher than the regular plan, which means one who has bought a direct plan would have better savings than the one who has purchased the plan through a mediator.
These were some of the differences between direct plan and a regular plan. While it is stated that immediate plans are better than regular plans, the direct plan means a lot of paperwork; this is just a minor thing and can be done, a direct plan provides a better return on the savings and does not even require a high price. Though some people do not know much about mutual funds, and that is why they fall into buying regular plans.
