Switch To Direct Funds

One of the reasons you invest is to get better returns and the mutual fund category is among some of the options to do so. Here too, switching from a regular to direct plan can lead to better gains. The article explains how

There are very few factors that impact the future returns of a mutual fund scheme the way the expense ratio does. Lower the better. Therefore, if everything remains the same, a lower expense ratio means better future returns for a mutual fund scheme. The best way to have a lower expense ratio is to go for the direct plan of a mutual fund scheme. In 2012, the Securities and Exchange Board of India (SEBI) asked asset management companies (AMCs) to introduce direct plans for all schemes. And from January 2013, every mutual fund has had two options: regular plan and direct plan. The same category, same scheme, same fund manager, same portfolio – the difference being the expense ratio charged to investors.

Direct plan has a lower expense ratio. These direct plans were created to connect investors directly to the mutual fund houses without any interference from intermediaries like brokers, distributors, advisors, and others. So, direct plans are those plans where investors can purchase units of MF schemes directly from the AMCs. They have a lower expense ratio as the investors buy directly from the AMCs and hence do not have to pay any trial fees or commission to any broker or agent.

Therefore, the direct plan of a mutual fund scheme having a separate NAV is higher than a regular plan’s NAV.