I have a doubt regarding direct plans and regular plans of mutual funds. Do direct and regular plans offer same returns? The direct plans have a higher Net Asset Value (NAV) than regular plans. This means if I am investing the same amount, I will get less units in a direct plan.
Here is the example:
Investment = ₹3,000
NAV (Direct) = ₹100 (Number of units allotted = 30)
NAV (Regular) = ₹95 (Number of units allotted = 31.57)
If this is the case, how can a direct plan benefit the investors?
- Seshu
A higher or lower Net Asset Value (or the number of units purchased) doesn't have anything to do with the returns. In fact, it echoes the old belief that a lower NAV is beneficial to investors. Read: Low NAV doesn't mean cheaper fund.
The direct plans do not spend money on commissions. The money saved is invested and it results in higher returns over a long period.
This article was originally published on February 08, 2016.
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