Direct vs Regular Mutual Funds: Why opting for a direct plan can help you save more | Mint
Source: Live Mint
If you want to invest in a mutual fund scheme, there are primarily two options. The first is to invest in a regular mutual fund, while the second one is to invest in a direct scheme.
In a direct plan, investors can invest directly in a mutual fund by creating an account on the AMC website. On the other hand, investors tend to invest through a mutual fund distributor (MFD) in a regular plan.
Investors who are acquainted with mutual funds typically invest in direct plans because they do not feel the need to go through an MFD, whereas those who are new to the world of investing prefer to opt for a regular route.
Direct vs Regular mutual funds
The key difference between the two forms of investing is that regular mutual fund investors stand to earn a higher return since the TER is lower in these schemes.
For those who are not aware — Total Expense Ratio (or TER) — refers to a host of expenses charged by the fund house on account of different expenses it carries out, including management fees, registrar’s fees, and distribution and marketing costs.
The Securities and Exchange Board of India (Sebi) rolled out direct mutual funds on January 1, 2013, to enable investors to invest directly in mutual funds by surpassing the intermediaries.
Here, we handpick the randomly selected five large cap funds and compare the returns delivered by direct and regular schemes.
(Source: AMFI; Five-year returns as on Jan 3, 2025)
As we can see in the table above, direct mutual funds gave as high as 1.83 per cent per annum more in some cases in comparison to their ‘regular’ counterparts.
In some schemes, the difference was muted (around 69 basis points) whereas in others, it was over 100 basis points a year.
How to invest in direct plans?
1. Go to the website of the AMC you have chosen to invest.
2. Enter your details and complete your e-KYC via PAN.
3. Link your bank account details to this account so that you can invest in the direct plan.
4. Choose the plan you want to invest and opt for lumpsum/ SIP.
5. Make payment and you will receive the mutual fund units after two days.
