Direct versus Regular Plan

There are 2 ways in which investors can invest in Mutual Funds – Direct plan and Regular plan.
When an investor uses the services of an advisor to invest, the advisor is paid a commission by
the Fund Manager. This is the benefit the advisor gets for providing his services.
If an investor is does her own research, narrows down the fund to invest in, makes the payment
either by filling a form or online without any assistance, then they have the option to choose the
Direct plan. Here no additional charges are paid towards any services provided by any advisors.

Following are some features of the 2 plans:

Direct plan –

• Bought directly from AMC, no intermediary involved
• Need only a bank account, don’t need a demat account
• No distribution cost as no intermediary involved
• NAV is tracked separately from that of Regular plan. Return is higher on direct plan compared to regular plan as the charges towards intermediaries are nil
• Can do online on portal of AMC or RTA (registrar and transfer agents like Karvy, CAMS)
• No annual trailing commission costs. Trailing costs are the commission that the advisors receive year after year on the investment you have made. This is a small amount but still deducted from the fund NAV.

1) Buy Mutual Fund units through an agent or a broker’s portal
2) Need a trading account and/or demat account
3) Distribution and trailing commissions are charged and deducted from the NAV
4) NAV lower than regular plan to the extent of additional distribution expenses – difference can
be upto 0.5% to 1% pa