The difference between regular plan and direct plan in the domain of mutual funds

When you are purchasing directly from a mutual fund company it is direct plan. This you are going to undertake from theirown website. On the other side a regular plan is where you involve the services of a broker or a distributor. Here you pay a commission to the intermediately. As an expense you recover it as part of the plan. By now it is clear that mutual funds are available in two options direct and regular. Though regular mutual funds are common, but of late the direct mutual fund investmenthas become common.

In January 2013, SEBI introduced the direct mutual fund. This was made mandatory for all asset management companies where options were provided to invest in direct mutual fund schemes. Just as the regular mutual fund plans there were no middlemen, distributor or broker in the process. It does make sense to opt for a direct mutual fund scheme as you do not need to pay any commission to the broker in the form of investment expenses or even a transaction fee of your investment. This does go on to reduce the expense ratio of the mutual fund scheme. In the long term your return is expected to increase. Over the long term your return also increases. To obtain more idea about the regular and direct mutual fund investment you need to go through the plans in details.

The various by which you can invest in direct mutual funds

  • You can make a visit to the website or an asset management company
  •  By availing the services of investment adviser who is a registered individual
  • Through CAMS or KARVY
  • MF utilities- there are an online transaction platform which is shared by various users.

There are various documents which are required to make an investment in direct mutual fund schemes that are as follows. You might need self – attested copies along with the KYC to make an investment in direct mutual funds. The list of documents include

  • PAN card along with an address proof
  • Any other form of identity proof would suffice

Would it be possible to switch over from a regular mutual fund plan to a direct mutual fund plan?

Yes to a large extent it is possible to switch over from a regular mutual fund plan to a direct mutual fund plan. But do go on to consider the implication of an exit load or even taxation before you plan to make a switch.

Exit load would be applicable to units that belong to various schemes in categories of mutual funds like debt, hybrid or equity for different lengths of time. Because of this you need to consider that the current plan that you have gone on to invest does not have an exit load. When you apply direct load it is going to decrease the value of redemption. In hindsight this would go on to invest the amount in the direct scheme..

The module of switching over from regular to direct mutual fund appis known as redemption.

Leave a Reply