What is direct and regular plan in mutual funds? Why there is no mention of expense ratio in direct funds?
- Praful Oka
Mutual funds offer two investment options to investors. Direct and regular plans. Direct plan allows investors invest directly in a scheme. Investors can either use the website or branch offices of mutual funds to invest directly in a scheme. However, this is possible only if the investor can do without any advice or help of a mutual fund advisor to select a scheme or complete the formalities. If the investor need the help of an advisor, he can opt for a regular plan. The main difference between the direct and regular plan is the expense ratio charged by them. Direct plans save on commissions and have a lower expense ratio. This results in better returns over a longer period of time. Some funds don't disclose their expense ratio, that is why it is not mentioned in some cases.
This article was originally published on October 12, 2015.
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