benefits of investing in direct plan

Direct Plan and Regular Plan are two plans offered under the same Mutual Fund Scheme. There is only one difference between the two plans: Expense Ratio. Every other scheme characteristic such as underlying portfolio, investment objective, asset allocation pattern, investment strategy, risk factors, fund manager, facilities offered, terms and conditions including exit load structure will be the same for both the plans.

When you invest via the regular plan the Mutual Fund house needs to factor in the upfront and trail commission it must pay to the intermediary i.e. the distributor or the agent for getting them business. These commissions normally range between 0.8% to 1.5% annually and they are transferred to the investor by reducing his mutual fund returns.

The smart and effective choice is to go direct. In Direct plan, you are investing directly with the Fund house and without the hefty commissions paid to the distributors. This means you enjoy the 100 percent benefit of your investments and this could mean a difference of as much as 1 crore rupees over a period of 25 years. That could be a bigger house a better car, a foreign university or nicer holidays. To understand the difference in returns investing via Direct plan creates over a long period go to the Moneyfront Savings Calculator.