Mutual funds are probably the most debatable and misunderstood forms of investment. The main reason is the lack of knowledge about mutual funds and its types in the public domain. Let’s take direct and regular mutual funds as an example. The difference between regular and direct mutual funds lies in the investment method. More information about these differences and a detailed comparison of regular vs direct mutual funds are provided in this blog!
Regular mutual funds are the mutual funds you invest in as per a distributor’s advice. The distributor must be registered with SEBI (Securities & Exchange Board of India) and AMFI (Association of Mutual Funds in India). The distributor handles most of the investment decisions and charges a commission for their services.
Direct mutual funds are plans you can invest directly with an AMC (Asset Management Company). You can invest online through their app or website or by visiting their nearest office. As a distributor is not involved in this process, you don’t have to pay any commission.
Now that we have understood the main difference between regular and direct funds, let’s explore the technicalities more. The detailed comparison table highlighting the difference between regular fund vs direct fund is given below:
| Basis of Comparison | Direct Mutual Funds | Regular Mutual Funds |
|---|---|---|
| Investment Method | Directly via online or offline methods. | By taking the help from a mutual fund advisor or distributor. |
| TER (Total Expense Ratio) | As no commissions are to be given, the overall expense ratio of a direct mutual fund is a lot lesser compared to the regular mutual funds. | As commissions are to be given, the overall expense ratio of a regular mutual fund is a lot higher than a direct mutual fund. |
| NAV (Net Value Assessment) | The NAV of direct mutual funds is on the higher side because the TER is lower. | The NAV of regular mutual funds is slightly lower as the TER is on the higher side. |
| Expertise Required | The investor has to manage the funds by themselves by taking the right decision at the right time. Also, they have to research and be experienced in handling their mutual funds accounts. | The investor can rely on the guidance and assistance of the mutual fund distributor totally. |
| Returns | Provide higher returns, especially over a long-term as the TER is low. | Regular mutual funds involve commissions resulting in higher TER and lower returns. |
Apart from expense ratio, and NAV, there are some other factors you need to consider while investing in either regular or direct mutual funds. Here are some more insights into these funds:
The differences between regular and direct mutual funds are easy to understand. Yet, the best way to invest in any of them is through an SIP. Consider your investment goals and risk tolerance before investing in mutual funds. You can also invest in a ULIP Plan (Unit Linked Insurance Plan) that combines the benefits of investment and life insurance. A part of your investment is used as an insurance premium whereas the remaining part goes into the wealth generation process.
Calculate the ULIP NAV (Net Asset Value) to understand how many ULIP units should be invested at that particular time considering the market value and performance at that particular time.
The difference between direct plan vs regular plan in mutual funds is pretty simple and straightforward. You can invest in a direct mutual fund directly by visiting the AMC (Asset Management Company) or through their website. To invest in a regular mutual fund, you will have to contact the mutual fund distributor.
Experienced investors must invest in direct mutual funds whereas new investors or beginners who need the advice of experts can invest in a regular mutual fund.
You must be able to do market research well to assess the market condition and handle all your investments by yourself. This is the only major drawback that scares away regular investors from investing in direct mutual funds.
Piyush Kataria, SEO Manager at PNB MetLife, is a seasoned digital marketing strategist with over a decade of experience in optimizing websites for search engines. His expertise extends to keyword research, content strategy, technical SEO, and link building, all of which have been instrumental in driving organic traffic growth at PNB MetLife. With a strong foundation in life insurance, Piyush leverages his industry knowledge to create targeted and effective SEO campaigns.
Sakshi Malhotra is a seasoned marketing professional associated with the Life Insurance industry since 2007. At PNB MetLife, she heads Digital Marketing and Direct to Customer line of business. She is responsible for driving effective customer engagement through the company’s website and social media channels. In addition, she drives customer online buying journeys to help them buy the right product.
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
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