Is there any fee to be paid while switching from regular to direct mutual fund plan? What should you be mindful of? Find out.
01-Dec-2022 •Ravi Banagere
When you switch from a regular to a direct mutual fund plan, you're essentially exiting from the regular plan and entering the direct plan. The exit will be considered as a redemption from the existing (regular) scheme. Correspondingly, when you invest the proceeds in the new (direct) scheme, it will be considered as a fresh investment. Same is the process if you wish to move from one broker to another.
There are some things you should know before switching from regular to direct mutual fund plans:
Do note that the exit load, lock-in period and taxation may differ if you've invested via SIPs. These are calculated from the date of each SIP instalment separately. So if you've invested in an ELSS fund which has a lock-in period of three years, each SIP has to complete three years before you can redeem from it. It's the same for when you calculate the tax liability and exit load.
It should also be noted that direct mutual fund plans (when compared to regular plans) come with a slightly lower expense ratio. A small 1 per cent extra fee can massively affect your returns in the long run. Learn how expense ratio can affect your returns.
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