At the start itself let me answer your doubt, yes direct plans give better returns as compared to regular plans in Mutual funds.
However, if he invests in a MF scheme through a broker or distributor he is going in for the regular(R) plan option of the same mutual fund scheme. Going in for a direct plan option saves investors of expense charges of around 0.5%-1.5% per year because in a direct plan an investor would be handling the paper work process all by himself along with selecting a mutual fund scheme, tracking its movements and the like (read more about various expenses and fees charged in mutual funds). NAV is always higher in a direct plan option than the regular plan option because of the absence of a broker or distributor eating away a part of the returns by the way of commissions and brokerage.
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What is the difference between D and R in mutual funds?
If an investor chooses to invest in a mutual fund scheme without going through a broker or distributor but by directly applying to the AMC of the scheme, it means that he is investing in a direct(D) plan option of a mutual fund scheme.However, if he invests in a MF scheme through a broker or distributor he is going in for the regular(R) plan option of the same mutual fund scheme. Going in for a direct plan option saves investors of expense charges of around 0.5%-1.5% per year because in a direct plan an investor would be handling the paper work process all by himself along with selecting a mutual fund scheme, tracking its movements and the like (read more about various expenses and fees charged in mutual funds). NAV is always higher in a direct plan option than the regular plan option because of the absence of a broker or distributor eating away a part of the returns by the way of commissions and brokerage.
Key Points to consider while choosing between Direct or Regular mutual fund schemes
- Return on investment:With lower expense ratio direct funds will definitely give a lot better return on investment over the long term.
- Efforts required in buying MFs directly: Buying MF plans directly can be difficult for a new investor as he won't get ,much advice from the broker as he won't be getting any commission. Besides he will have to maintain separate login credentials for each AMC whose fund he wishes to buy.
Read more:
Is it a good idea to invest in mutual funds?
What is the difference between G and D in mutual funds?
Open Vs. Closed-End Mutual Funds: What's the Difference?
Copyright © ianswer4u.com
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