What will be the difference in returns from regular and direct plans? Is there any additional charges for investments in regular plans?
- Manikandan Palanivel
Mutual funds usually pay commissions to agents to sell a regular plan. When an investor invests directly with a mutual fund in direct plans, he can save this money. Since direct plans do not pay any commissions, they will have a lower expense ratio. For example, Franklin India Bluechip Fund's regular plan has an expense ratio of 2.20 per cent, compared with 1.29 per cent in its direct plan. The lower expense ratio will result in better returns for direct plans, especially over a long period, due to compounding effect.
Here is a story from our archives, which will give a better idea: Direct Plans Offer a Little Extra.
This article was originally published on December 22, 2015.
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