Should I invest in the regular option or the direct option of a mutual fund? What kind of funds should I invest in for the long-term?
-Chandraman
All mutual funds come with an expense that gets deducted from the NAV on a daily basis. This expense varies from fund to fund, but it is generally in the range of 2 - 3 per cent per annum. The difference between the regular plan and the direct plan of a mutual fund is that the latter is less expensive, which translates into higher returns. Since the direct plan is sold directly through the AMC, it is cheaper. If you're able to choose a fund that's right for you, without the guidance of a fund agent or any such intermediary, then you should opt for the direct plan.
For a long-term investment, there are a few things that you should do and a few that you shouldn't. Firstly, don't invest in lump sum; always have a systematic investment plan (SIP) in place to avoid catching a market peak and average out the cost of purchase of units. D not invest in a sectoral or thematic fund; pick funds that are diversified across market sectors and capitalizations. Funds that don't have a constrained mandate are best for long-term investors. Some options to choose from are Quantum Long Term Equity, ICICI Prudential Dynamic, UTI Equity and Franklin India Prima Plus.
This article was originally published on April 07, 2014.
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