Nowadays, mutual funds have diversified a lot in terms of their type, and more investors are gaining interest to invest in it. Regular and direct mutual funds are two distinct types of mutual funds that vary primarily on the accord of their plannings.
From January 2013, SEBI has made a rule for every AMC (Asset Management Company) to deliver all the investors with an option for choosing the direct mutual fund. Now, a common question that might arise in the mind of every investor is regarding the difference of a regular mutual fund and a direct mutual fund.
Here is a detailed comparative study that can help all the investors to have a clear idea about both regular and direct mutual funds. Considerations of every vital parameter are made to justify the comparison. As an investor, you can easily decide on the best mutual fund to take according to your goal and preferences.
The Buying Procedure
When it comes to the buying procedure, there is a clear difference between the direct mutual fund and regular mutual fund. For buying a regular mutual fund, you have to approach a distributor of the mutual fund plan. Brokers and professionals can also deliver you the regular mutual fund plans.
If you want to buy a direct mutual fund plan, the websites of the various companies providing direct mutual funds can be the best place for you. The professionals and brokers are absent in this case.
Payment of Commissions
As an intermediate person is present in the case of the regular mutual fund, the AMC pays some commission to him. As a result, the expense ratio for the investor having a regular mutual fund is high. On the other hand, the AMC needs not to pay any commission to any broker in case of a direct mutual fund. This results in minimizing the expense ratio and the investor can get a high return on a long term plan.
Investment Rebalancing
Mutual fund investments always have chances to make the investor face various risks related to the market. However, expert reviewing can help him to avoid such circumstances. The professionals who act as the intermediates of the regular mutual fund holder can review the portfolio of the investment and enhance the performance of the holdings. This helps the investor to enjoy more returns.
The direct mutual fund holders cannot get this benefit, and they might need to spend more on the expert.
Getting Recommendations
The direct mutual fund investment holders generally do not get any expert recommendations related to the investment holdings. Regular mutual fund investors can quickly get the recommendations from the professionals, thus expect a good return.
So, it is quite natural that any investor having minimum experience of handling mutual fund investments will go for the regular mutual fund plan. Direct plans can be the best for the investors who know about tracking all the holdings.
Cost of Buying
Many investors primarily face a dilemma when it comes to the cost of buying either regular or direct mutual funds. In the first instance, it might seem that the direct mutual fund is the best to choose. However, the regular ones can ensure a bit more security on the holdings. Furthermore, the investor’s experience is a vital parameter to consider.
Self-assessment is the last word
Apart from all the comparisons, each investor needs to spend some time on self-assessment before taking a mutual fund. The expected amount of return, type of holdings and even the type of provider are responsible for the fate of a mutual fund investor.
At present, if you are a new investor desiring to take a mutual fund plan, naturally, you can choose the regular mutual fund. In such a case, do not forget to do extensive research on several providers and the perks they deliver to you.
The quality of the broker or professional is another thing that you must consider checking. Always remember that the AMC to paying him the commission on your favor while you have taken the regular mutual fund plan. The intermediate professional needs to co-operate and guide you to get the best returns possible.
For gaining the ultimate profit by an investment in the mutual fund, you must also keep in mind about the term of your investment. It has a significant impact on the returns you get. Make sure you read all the documents related to the mutual fund plan.
As an investor, you can easily switch from a direct mutual fund to a regular variant quite easily. Both online and offline procedures are available for it. Always consider speaking with a mutual fund expert about the various consequences that might happen after you switch from one plan to another. The tax implications can sometimes be a big problem that might occur due to the switching of the mutual fund plans.
