Regular & Direct Plan

You can buy mutual funds through an agent. This is a Regular Plan of a mutual fund scheme. You can also buy mutual funds directly from the mutual fund company. This is a Direct Plan of the mutual fund scheme. Since the agent in a Regular Plan is also supposed to advise the investors, the agent gets a commission paid by the mutual fund on your behalf. Hence, the Total Expense Ratio (TER – the amount charged by the mutual fund company to manage the fund) of the Regular Plan is higher than that of the Direct Plan. This in turn affects the Net Asset Value (NAV) of the mutual fund, which is lower for the Regular Plan. As a result, the return on a Direct Plan is higher than the Regular Plan. Every scheme of a mutual fund, such as, say a Large Cap Fund, would have a Regular Plan and a Direct Plan.

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