Imagine you are planning a holiday to the Maldives and you don’t have much idea about the place. How would you plan your trip? You may either call up a travel agent and book your trip or spend hours researching places to stay, places to visit, modes of transport etc and finally draw up your itinerary, make your bookings. The difference between the two is that you choose to take help and do it through someone versus you do it completely on your own.
Direct and Regular Plans also differ in the same way. When you invest in a mutual fund through a distributor, your money is invested in a Regular Plan. When you invest directly with a fund, your money is invested in the Direct Plan of the scheme. While both plans give you access to the same scheme and portfolio, they only differ in their NAVs and expense ratio. Since a commission must be paid to the distributor in case of a Regular Plan, the expense ratio of Regular Plans is higher than that of Direct Plans. This leads to a slightly lower NAV of the Regular Plan in comparison to Direct Plan of the same scheme.
Investors who are comfortable doing the research and managing their investment portfolio by themselves can opt for Direct Plan else Regular Plan is more suitable.
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