I have been investing in mutual funds for the last 10 years through distributors. I have learned that the distributor gets around 1% of the value as commission. If I transfer the entire money in the Direct plan, how will I benefit?
-Dr. Amit Pathak
Regular plans charge a higher annual expense ratio than the direct plans as they include the distributors' commission. In case of equity funds, this difference can be around 1%. This can make a meaningful difference to the worth of your investments over a period of time.
However, please note that direct plans also require more work from you as there won't be a distributor to help you. You'll have to manage your investments, do the paperwork and deal with the AMC on your own. But, if you are capable of doing all that by yourself, you should definitely go with direct plan. That way, in the long run, you will end up accumulating an even better corpus.
This article was originally published on November 25, 2016.
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