Why do direct plans have higher NAV?

I find that the Net Asset Value (NAV) of the direct plan is higher for purchase than regular plan? Since the commission of the middle man is no more, shouldn't the buying NAV of the direct plan be lesser than the regular plan and the selling NAV be higher than the regular plan? Can you please explain?
- Varsha

A lower or higher Net Asset Value (NAV) or the number of units purchased does not have anything to do with the return prospects. The confusion is mainly because many investors treat NAV of a fund like stock price. It is a big mistake. The NAV of a fund just reflects the value of the portfolio of the fund, whereas the traded price of a stock could be lower or higher than its actual value. The reason for investing in direct plans is simple: they save money on distribution and that money invested can offer superior returns over a long period.

For more read: A lower NAV doesn't mean cheaper fund.

This article was originally published on May 03, 2016.