Direct plans are cheaper than the regular ones as no distributor commission is loaded on them
13-Sep-2016 •Research Desk
What is the difference between regular and direct plans of mutual funds?
-Vinayak R Talwadker
They are the same except that a direct plan charges lower annual expenses because it does not pay the distributor fee or commission. This is because in case of direct plan, you invest the money 'directly' with the fund house, without going through a broker or agent. Thus, the direct plans of equity funds can be cheaper by as much as 1% in their annual expense ratios. This makes them suitable for 'do-it-yourself' investors. If you are new to fund investing, it may not be a bad idea to take the services of a distributor and therefore, invest in regular plans. Over time, as you gain more knowledge and feel confident about managing your investments independently, you may consider switching to the more economical direct plans.