Home / Mutual Funds / News /  Mutual Funds: Regular Plan or Direct Plan? Wint Wealth cofounder Ajinkya Kulkarni explains what you should pick and why

Wint Wealth cofounder Ajinkya Kulkarni has shared a detailed post about his take on the difference between regular plans or direct plans of a mutual fund.

One has two choices when investing in mutual funds: a regular plan and a direct plan. In direct plans, the investor directly deals with fund houses while the investor has to go through a distributor or an agent broker, who gets a cut during the process.

Kulkarni gives the example of Axis Bluechip Fund. The expense ratio for a direct plan is 0.55% while it is 1.64% for a regular plan. The annual additional payment of 1.09% has a direct impact on the returns you receive from your investment. And, the difference is stunning. According to the Wint Wealth cofounder, If you invested 10 lakhs in the Axis MF Bluechip Fund in 2013, the 10 lakhs would become 36.7 lakh in a regular plan and 50.2 lakh in a direct plan.

Also Read: Top stocks mutual funds are buying with your money

“I am not discounting the services agents provide, but unless you have taken an agent's help to choose your fund, paying the extra 1.09% does not make sense," Kulkarni said.

According to Kulkarni, if you invest through the bank's mobile app, it's likely that you've selected regular plans. The majority of bank apps provide regular funds only. If you are financially savvy, you should know which fund to choose and do enough research to support your decision to know that choosing direct funds is ideal.

Also Read: Open ended vs close ended mutual funds: Where you should invest?

Kulkarni however, warned that picking funds without proper research and knowledge will do you more harm than good. “So if someone is unsure they should definitely take an agent's advice," he wrote as a reply that not everyone is able to choose investments, have the patience to stick onto them for ten years and tolerate periods when so-called five-star funds perform poorly. A skilled agent will use this to defend the fee disparity, the user wrote.

“Check if you have chosen a regular or direct plan. And unless you need an agent's help, go for direct mutual funds. It will save you a lot of money in the long run," he concluded his LinkedIn post as saying.

ABOUT THE AUTHOR

Sounak Mukhopadhyay

Sounak Mukhopadhyay, who also goes by the name Sounak Mukherjee, has been producing digital news since 2012. He's worked for the International Business Times, The Inquisitr, and Moneycontrol in the past. He's also contributed to Free Press Journal and TheRichest with feature articles. He covers news for a wide range of subjects including business, finance, economy, politics and social media. Before working with digital news publications, he worked as a freelance content writer.
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