The investors are being attracted towards the direct plan mutual funds these days. There are many differences and similarities between the direct and regular plan mutual funds but it is very important to choose the right plan according to your requirement. These days, many agencies and distributors will recommend you to go for the direct plan and not the regular plan and they have so many valid reasons for that. This can be understood only if you understand the basic difference between direct and regular mutual fund. Here are some of the most convincing reasons why you should opt for direct mutual funds rather than the regular plan mutual funds.
1. The Expense Ratio is Lower in Direct Plan:
The one of the most convincing and appealing reason for investors to choose the direct plan mutual funds over the regular plan mutual funds is that there are no hidden charges and brokerage commissions in the direct plan. The overall expense ratio of the direct plan is much lower than the regular plan and this is because there is no sales commission you need to pay. In case of regular plan mutual funds, there are so many hidden costs that are deducted from your total returns and you don’t even realize it. But in case of direct plans, you do not have to pay any hidden charges and you get your highest potential return.
2. The NAV is Higher in Direct Plan than the Regular Plan:
After the expense ratio, another biggest factor that will make you switch from the regular plan to a direct plan is that the NAV is higher in the case of direct plans. The NAV is basically the price at which any mutual fund stock or unit is bought or sold. There is a formula which is used to calculate the total NAV of a fund. It can be calculated if you know your fund liabilities and the fund assets. It is a very good thing that the direct plans have a higher NAV as the higher NAV will lead you to the better returns. The NAV is a very important factor especially for those who are a long-term investor.
3. Direct Plan Mutual Funds Provide up to 40% of more Long-Term Savings:
The direct plan mutual fund schemes are a very good option for those who are looking for a long-term investment. As it has been seen in the market that they are capable of providing up to 40% more profit as compared to the regular plan mutual funds. It is very important to check the name of the scheme that if it contains the word direct in it or not.
4. SEBI Regd Advisors Supports direct Plan Mutual Funds:
When it comes to choosing a mutual fund plan it is very important to understand that security is very crucial. Ost of the direct mutual fund plans are directed by either the distributors of by the mutual fund houses and they are all SEBI registered advisors. It is a great advantage of using the direct plan mutual fund scheme as there are very less chances of being cheated or facing a fraud with your hard earned money.
5. The Advisors of Direct Plan Mutual Funds are Unbiased:
It is seen that in most of the cases of mutual fund investors, the portfolio manager is either a relative or someone very loose. In that case, there are chances that the investor has not made high-level inquiries before handing over the funds to invest. It is a great thing that the direct plan mutual funds gives you the ability to have the most unbiased advisors who do not have any conflict of interest.
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