You would have seen that most Mutual fund plan has direct plan and regular plan. And you also would have noted that there is a difference between the NAV of the direct and regular plan. Let me take an example of one of the funds – Nippon India Growth Fund and compare the NAV of Direct vs Regular plans (this is as of 16th April 2022).
Nippon India Growth Fund (regular) – 2071.5289
Nippon India Growth Fund (direct) – 2210.8030
** NAV taken from valueresearchonline.com
So why is there a difference in regular and direct plan NAV?
The direct plan is one in which you as an investor are investing directly with the AMC. So there are no distribution costs involved. So when the overall costs of the plan are lesser, the NAV is slightly higher. The regular plan includes the cost of the distributors, their commissions are involved in the cost. Hence the NAV is lower, however small you view it.
More the NAV, the better for me in the longer term – since I am going to grow at a higher rate because of lower costs. It’s a child’s guess to understand that investing in a direct plan is more beneficial than a regular plan, OVER A LONG PERIOD.
So what are the cons of doing direct mutual funds – The distributors are expected to provide guidance for the charge we understood about earlier. This lack of guidance and investor being alone in this journey is the only “con” about going direct.
There are many apps now in the market which provide opportunity for you to invest in direct mutual funds. Paytm Money, Kuvera.in, Invezta.com, mfuindia.com and many more.
