Comparte Capital Investment

Regular mutual funds over Direct plans

Investing through a regular plan is more beneficial for a retail investor than investing in direct plans?

Two variations of Mutual fund scheme- Direct and Regular


Meaningful investments are important to secure our future and fulfill our dreams and financial goals. If you are planning to invest your money for a bright future, then mutual funds can be the best option for you as it is the simple but best investment vehicle. Every individual has their own financial goals, and they plan to achieve them. And there is no better way than mutual funds for people who look for goal-based investing. A mutual fund is an ideal choice for those who do not have much time for doing thorough research on different investment options. It is suitable for all types of investors whether their financial goals are short term, mid-term, or long term. In this article, we will cover the features of both direct and regular mutual fund plans and how regular plans are more beneficial than direct plans to help an investor to meet his or her financial goals.

Two variations of Mutual fund scheme- Direct and Regular

If you have planned to invest in Mutual Funds to build wealth, you must get an idea about this investment plan.  Every scheme of mutual fund has two variations – direct and regular plan.  Many retail investors prefer regular plans because of the benefits that it offers and its popularity.  However, technological advancements encourage many people for direct online purchase and make their own decisions for investment. The Securities and Exchange Board of India (SEBI) directed various mutual fund companies to offer their products in both the direct and regular variations.  Investors can buy direct plans from the fund houses without any expenses for buying them or without seeking assistance from any financial advisor.

Direct Mutual Fund Plan

The Securities and Exchange Board of India has been introduced the first direct mutual fund plan on 1st January 2013. As a regulator of asset management companies, SEBI has made it compulsory for Asset Management Companies to allow investors to buy direct plans to invest without the involvement of any brokers, agents, or distributors. The expense ratio is the only difference between the regular plan and direct plan. Since you are investing directly with the fund house in the case of a direct plan, there is no need to pay any commission to the agent or distributor.

Regular Mutual Fund plan

As said above, in the direct plan, you have the option to buy directly from the website of a mutual fund company without paying any commission to the intermediary. However, in the case of a regular plan, you invest your money in mutual fund through an agent or distributor, and you need to pay a commission through their service. The amount for the commission is recovered from the mutual fund companies from the plan as an expense. The expense ratio is higher in regular plans than a direct plan. In other words, the return that you make on a regular plan is lesser compared to the direct plan.

Know the Difference – Regular Vs Direct

Many people think that direct plans and regular plans are different schemes of mutual funds. In fact, these are two variants offered by AMCs under the same principal scheme. These are the two options for investors who wish to invest in a mutual fund scheme. The only difference between a direct plan and a regular plan is that the mutual fund house or AMC pay a commission to your agent or distributor as a transaction fee or distribution expense in regular plans. However, you need not spend any money as a transaction fee if you opt for a direct plan. Instead, it helps to reduce the expense ratio of your scheme by adding this fee to your investment balance. It increases your benefit in terms of percentage returns.

Which is the better choice – direct plan or regular plan?

Direct plan of Mutual fund is getting a lot of popularity these days, and the main reason for this buzz is the media coverage. Since the direct plans offer higher returns and the reduced expense ratio, many people think that it is a better investment option. However, it is not that simple to compare both, and one cannot ignore the quality of service and assistance that get in regular schemes. Selecting the right plan is important for an investor; otherwise, it may not meet your financial goals. It can even wipe out your hard-earned wealth. With the help of an agent or distributor, you can evaluate the investment objective and choose the right plan to build your wealth. Many mutual fund houses or companies create an impression in the minds of investors that direct plan can yield higher returns than regular plans to their investment.

Choose direct plan only if you have deep knowledge about mutual funds

Like all other investment choices, the mutual fund also carries some risks. If you are a novice with mutual funds, you can seek assistance from a mutual fund expert or agent to know about those risks and the expected returns before taking the investment decision. An investor should do a cost-benefit analysis qualitative-wise and quantitative wise before investing in a mutual fund. Compared to the regular plans, the incremental return is an attractive factor for investors in direct plans. However, the direct plan is better only for diligent investors with a deep understanding of mutual fund. If you can pick and track your fund investment smartly, then direct plans are a good choice for you. But go for a regular plan if you do not have much idea about mutual funds.

Why Invest in the Regular Plan of a Mutual Fund?

Direct plans are certainly cheaper, but that is not the only criterion to select a mutual fund plan. Even if the percentage return is relatively small in regular plans, it is advisable to choose that if you have long-term financial goals.  By opting for a regular plan, an advisor assists you in analyzing the track record and helps you to choose the right fund for investing to fulfill your financial goal. With the help of experienced finance teams, corporate houses can choose the right mutual fund, while common people need guidance before choosing the right scheme. By choosing the regular plan, retail investors get this guidance.

Improve your returns with the help of a financial advisor

Periodic review or rebalancing of your portfolio by an expert helps you to improve the performance of your mutual fund holdings. Most investors do not track their portfolio and make the necessary account changes, especially if they invest in direct plans. But if you choose the regular plan, you can do all these things efficiently with the help of fund managers. Always go for a regular plan if you are looking for long term financial goals, as advisors help you to manage your fund more wisely and make a huge difference to your returns in this scheme.
Professional financial advice is very helpful before taking an investment decision. Even if direct plans have their own advantages, documentation can be a tough issue for many investors, be it online or offline. An investor needs to furnish a separate set of documentation for each direct investment. Investors who are not experts in online operation needs to visit the fund house branch for each transaction if he opts for direct plans. Always go for regular mutual fund plans unless if you are a corporate investor with a large portfolio. Choose a regular mutual fund plan as a retail investor and keep track of its performance regularly to get maximum returns.

That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.

With this one can say “Mutual Fund Sahi hai”, so let me do Nivesh