Mutual Funds: Choose Best Direct Mutual Plans over Regular Plans

A mutual fund is a broad sector divided into various categories depending on the risk, investment horizon, liquidity, and others. One of the divisions you may not be aware of would be the direct and regular mutual funds category. Today, several investors always search for the best direct mutual funds options, as there are many advantages associated with it.Let’s get to know some of the reasons why you should choose direct plans over regular ones:

1. Meaning Direct mutual funds are the plans which you directly purchase from an asset management company. Typically, you can buy three types of plans – open-ended funds, new fund offers (NFO), interval funds. Regular funds involve purchase of mutual fund schemes from intermediaries like brokers, agents, or advisors.{2D743194-97C2-43F9-BC28-AEC370801ECD}
2. Low Expense Ratio One of the reasons you should opt for the best direct mutual fund is that the expense ratio is low as compared to the regular plans. In regular plans, the AMC adds the commission of the mediator to the expense ratio. As a result, the ratio becomes high for regular plans making it expensive.
3. Better Returns There is no sales commission in the case of direct plans, which helps you realise annual returns that are 1% to 1.25% high. Best direct mutual funds help you reap better returns than regular plans. In the initial years, the returns can seem marginal, but it can become substantial if you’re investing for a longer time.
4. High Asset Value Direct mutual fund plans have higher net asset value. When the operating expenses get reduced from the assets under management, this helps to lower the expense ratio and result in higher NAVs.

One of the advantages of investing directly through AMC is that there is transparency but no guidance. However, in the case of regular mutual funds, you get time to time guidance from a financial advisor, andthere is regular monitoring. You are indirectly involved in the investment game. When it comes to outperforming, direct mutual funds always stay true on this part, provided you are investing in the fund for a longer time.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.