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Why should I shift from Regular Plans to Direct Plans Mutual Funds?

Written by - Akshatha Sajumon

May 27, 2019 3 minutes

Usually, when we place orders online we come across two products, those that don’t charge for delivery and the other that charges for the same. We normally opt or like the ones that are “Delivery Free”. Right?

The simple reason being we do not incur additional charges for our purchase and that reduces the burden of our expenses. Even Direct Plans and Regular Plans of Mutual Funds work on a similar concept.

Regular Plans are mutual funds that you buy through an intermediary such as an advisor, distributor or broker. These agents charge commission, trail or distribution fee for the service they provide, so the total expenditure for your investment is high. And not always do brokers or intermediaries intent to sell plans that suit your financial needs, their primary objective would be to push the scheme and earn their share of profit.

Now let’s look at funds that are like the delivery of free online products.

SEBI made new regulations with regards to Mutual Funds which was made effective on January 1, 2013, 1.e. Introduction of Direct Plans. Direct Plans are those mutual funds in which investors can directly invest with Asset Management Companies (AMC) who do not involve intermediaries and do not charge any agent or broker fees. The advantage of Direct Plans is that the Net Asset Value (NAV – per share market value of a fund) is more when compared to Regular Plans implying that you get to earn more returns on your investments.

Let me help you understand with the help of an example:

Direct vs Regular example

A good investment of 2 lakhs in each Direct, as well as Regular plans for 20 years, yield different returns. Direct Plans offer 42.2 lakhs which are 16.5 % returns, whereas Regular plans help you earn 32.7 lakhs which are approximately 15% returns. This is a clear example that Direct plan is more beneficial and hassle-free.

And did you know you can invest in Direct Plan Mutual Funds for zero commission and zero fees? Yes, “Fisdom ” app is India’s top trusted app for Direct Plan Mutual Funds, provides you this added advantage. Who should invest in Regular and who should invest in Direct plans?

If you are a newbie in investing and have no prior knowledge of mutual funds, then initially you can opt for Regular plans. However, it’s highly recommended that you quickly switch to Direct plans once you have gathered enough experience and knowledge. Now that you know Direct Plans are better than Regular Plans, Don’t miss on the 1.5% extra returns!

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