What is the difference between regular and direct mutual funds?
direct plan. Both the plans come with two options — growth and IDCW. It is important for every investor to choose the correct plan as well as option.
A growth option is suitable for investors who are not seeking Income Distribution cum capital withdrawal. This option focuses on capital appreciation and compounding impact for the investors. On the other hand, the IDCW option provides investors with regular income in the form of dividends.
Regular plan — Mutual funds of regular plans are bought through a mutual fund distributor. In this plan, one may choose to invest in mutual funds with the help of a Mutual Fund distributor/agent in what is termed as a ‘Regular Plan’, according to Association of Mutual Funds in India (AMFI).
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In regular plans, fund houses pay intermediaries a brokerage or distribution fee as they sell these plans to the investors and these plans have a higher expense ratio. The higher expense ratio has an effect on the investors’ overall returns because the fund house passes on these charges to the investors which impact the overall gains.
Direct plan — Mutual funds of direct plans are bought from the fund house and no intermediary is involved. An investor can directly purchase these plans from the website of the fund house. One can also purchase direct plans through SEBI registered investment advisors (RIAs).
One may invest in mutual funds DIRECTLY i.e., without involving or routing the
