Direct Vs. Regular Mutual Fund - Which Is Better?
The mutual funds are of two types – Direct Mutual Fund and Regular Mutual Fund. In the recent years, in the investment world, one could have definitely come across ‘Direct Plans’ – thanks to the Internet era where news spread like a wildfire. So, what’s the difference between Direct and Regular Mutual Fund and which is better? Let us have vivid discussion in this article.
What is a Direct Mutual Fund?
The Direct Mutual Fund was introduced in the year 2013, making it mandatory for all Asset Management Companies to provide an option to invest in mutual fund schemes directly, without the involvement of any mutual fund agents, brokers or distributors like in Regular Mutual Fund.
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Now, let’s compare…
The major criteria on which the Direct and Regular Mutual Funds is the cost structure. All other parameters like the fund manager, the portfolio and other such things are alike.
However, the cost involved in mutual fund investments effectively impact your returns. Let us see in detail:
Usually, the fund houses charge an annual fee for those who invest in mutual fund scheme. It is otherwise called the expense ratio and it covers all the expenses including management fees and operating expenses of the fund. It is the percentage of total assets of the fund and is deducted from the returns generated. So, it is obvious that, the lower the expense ratio, the better will be the returns.
In that case, the Direct plan is cheaper compared to the Regular plan. Because, in case you choose a Regular plan you end up with an intermediary like an agent or a broker. Here, you will be paying the commission for the agent that results in increase of expense ratio and lower returns. In contrary, in the Direct plan, this extra cost can be avoided. All kinds of investment details will be acquired directly from the fund house through their official website or visiting the office, etc…,
Why do you need a mutual fund advisor?
From all the above points, though the Direct plan is cheaper compared to the Regular plan, it is also considered riskier. If you are new to investments world, then it is always safe to take the investment guide’s assistance. Below are the services that you will be getting if you opt for a professional Investment Consultancy Service:
The performance and trends of the mutual funds differs from time to time. Though if you are going to choose, the regular or direct plan is secondary, opting for the right fund house and knowing the difference between a good fund house and the poor fund house is important. It will lead to a 4-5% difference in return over a period of time.
Reviewing your portfolio during regular intervals will help you rebalance. The Insurance Consultancy service provider will help you improve the performance of your holding and get you more returns.
Neglecting the portfolio without a proper tracking or a review process, will result in a poor return. Maintaining the record without a proper tracking will also lead to loss of money without a proper record of investments.
So, if you are looking for a wise investment plan, it is always advised to take the professional’s help. Scroll through our Sulekha page, and get connected to the professional Online Investment Consultants.