All investors can choose between 2 types when it comes to mutual fund investments – direct mutual funds and regular mutual fund plans.

All investors can choose between 2 types when it comes to mutual fund investments – direct mutual funds and regular mutual fund plans. Before the year 2013, there was only one type of mutual fund plan, after which SEBI mandated all the AMCs to offer two types of mutual fund plans – direct plan and regular plan.

Let us understand the difference between a direct and a regular mutual fund plan. A regular mutual fund plan is offered by a retail broker, advisor or distributor to a potential investor. The AMC that handles the mutual fund pays a commission to the broker.

On the other hand, the direct plan eliminates the retail broker or advisor from the transaction. This means that the investor directly invests in a fund via the AMC that handles the fund.

The main differences between a direct mutual fund plan and a regular mutual fund plan are as mentioned below:

1. A direct plan charges a lower expense ratio

2. Direct plan can be purchased only from the AMC, whereas the regular plan is purchased via a middleman

3. Direct plan is suitable for a DIY investor, whereas the regular plan is suited to the retail investor

So which one should you go for? If you are an expert investor who has the knowledge of stock markets, and are capable of conducting your own research, then the direct mutual fund plan will suit you more.

However, if you are a normal investor who does not have the expertise or the time to conduct a research yourself to make an informed investment decision, then you must opt for a regular mutual fund plan.