{"id":470,"date":"2017-04-14T07:10:26","date_gmt":"2017-04-14T07:10:26","guid":{"rendered":"http:\/\/blog.kuvera.in\/?p=470"},"modified":"2019-11-13T01:14:57","modified_gmt":"2019-11-13T01:14:57","slug":"direct-plans-better","status":"publish","type":"post","link":"https:\/\/kuvera.in\/blog\/direct-plans-better\/","title":{"rendered":"Direct Plans vs Regular Plans : What does it mean and why should you care?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_40 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" area-label=\"ez-toc-toggle-icon-1\"><label for=\"item-69d0df55e3532\" aria-label=\"Table of Content\"><span style=\"display: flex;align-items: center;width: 35px;height: 30px;justify-content: center;direction:ltr;\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/label><input  type=\"checkbox\" id=\"item-69d0df55e3532\"><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/kuvera.in\/blog\/direct-plans-better\/#Whats_the_difference\" title=\"What\u2019s the difference?\">What\u2019s the difference?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/kuvera.in\/blog\/direct-plans-better\/#Direct_Plans_will_help_me_save_15_commissions_every_year_thats_not_much\" title=\"Direct Plans will help me save 1.5% commissions every year.. that\u2019s not much!\">Direct Plans will help me save 1.5% commissions every year.. that\u2019s not much!<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/kuvera.in\/blog\/direct-plans-better\/#But_my_broker_provides_me_advice_Its_OK_if_he_earns_some_commission_Is_that_wrong\" title=\"But my broker provides me advice. It&#8217;s OK if he earns some commission. Is that wrong?\">But my broker provides me advice. It&#8217;s OK if he earns some commission. Is that wrong?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/kuvera.in\/blog\/direct-plans-better\/#Agreed_Direct_Plans_are_better_but_how_do_I_choose_which_Funds_to_invest_in\" title=\"Agreed, Direct Plans are better, but how do I choose which Funds to invest in?\">Agreed, Direct Plans are better, but how do I choose which Funds to invest in?<\/a><\/li><\/ul><\/nav><\/div>\n<p>Each\u00a0Mutual Fund scheme has\u00a0a Direct Plan and a Regular Plan. If you invest in Mutual Funds through a broker or a distributor, you are investing in Regular Plans. All distributors like Scripbox, MyUniverse, Fundsindia, ICICI Direct, Bajaj Capital etc provide only Regular Plans. But when you invest through the Mutual Fund directly or take the help of an advisor like Kuvera , you invest in Direct Plans. All Direct Plan mutual fund schemes require the word \u201cDirect\u201d or \u201cDirect Plan\u201d to be clearly mentioned in the scheme name. Always look for or ask for this in your portfolio statement.<\/p>\n<p>&nbsp;<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Whats_the_difference\"><\/span><strong>What\u2019s the difference?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><strong>Regular Plans pay commissions<\/strong> to the broker or the distributor. This commission is added to the expense ratio of the scheme. So these plans have a higher expense ratio as compared to <strong>Direct Plans that do not have commission expenses<\/strong>. Regular Plan commissions can amount to as much as <a href=\"https:\/\/www.amfiindia.com\/commission-disclosure\"><strong>1.5% of the AUM(the value of your holdings) as commission<\/strong><\/a> from Mutual Funds, every year! When brokers tell you their advice is for free, it isn\u2019t.\u00a0Because you pay a heavy price (commissions and advice biased by commissions) for it. In effect, regular plan investments give you lower returns as compared to Direct Plans because of these commission expenses. Obviously, a broker will never help you or advise you to invest in Direct Plans.<\/p>\n<p>In short, if you invest in Direct Plans, the <strong>same schemes will get you better returns<\/strong>.<\/p>\n<p>&nbsp;<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Direct_Plans_will_help_me_save_15_commissions_every_year_thats_not_much\"><\/span><strong>Direct Plans will help me save 1.5% commissions every year.. that\u2019s not much!<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>If you consider the compounding impact of this leakage year on year, it adds up to quite a bit. We did the portfolio value calculations for just a Rs 1 lakh investment in a Direct Plan and a Regular Plan over 40 yrs. Your investments will be worth <strong>35% more in just 20 yrs<\/strong> when you invest in Direct Plans. See chart below<\/p>\n<p><img loading=\"lazy\" class=\"wp-image-490\" src=\"https:\/\/blog.kuvera.in\/wp-content\/uploads\/2017\/04\/DirectPlansvsRegularPlans-300x236.png\" alt=\"Direct Plans vs Regular Plans; A comparison\" width=\"423\" height=\"333\" srcset=\"https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2017\/04\/DirectPlansvsRegularPlans-300x236.png 300w, https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2017\/04\/DirectPlansvsRegularPlans-768x603.png 768w, https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2017\/04\/DirectPlansvsRegularPlans.png 977w\" sizes=\"(max-width: 423px) 100vw, 423px\" \/><\/p>\n<p>We assumed a 12% Return on investments and a Total Expenses Ratio of 1.0% for Direct Plans and 2.5% for Regular Plans.<\/p>\n<p>&nbsp;<\/p>\n<h4><span class=\"ez-toc-section\" id=\"But_my_broker_provides_me_advice_Its_OK_if_he_earns_some_commission_Is_that_wrong\"><\/span><strong>But my broker provides me advice. It&#8217;s OK if he earns some commission. Is that wrong?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>Yes, it is. Because the commission is paid by the fund house and not by you directly. Whose interest will the broker work for? Isn&#8217;t there a conflict of interest when the broker has to make a choice between the scheme that suits your risk profile and objectives vs a scheme that pays attractive commissions?<\/p>\n<p>&nbsp;<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Agreed_Direct_Plans_are_better_but_how_do_I_choose_which_Funds_to_invest_in\"><\/span><strong>Agreed, Direct Plans are better, but how do I choose which Funds to invest in?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>You can visit <a href=\"https:\/\/www.kuvera.in\">kuvera.in<\/a> and try our Financial Planning Solution here. We do your risk profiling and goal planning to build a detailed financial plan. And\u00a0recommend which Mutual Fund schemes in which you should invest. We have used our years of Investment Management experience to develop a scientific and disciplined approach to investing. Importantly, we are a Direct Plan only platform so our advice is never biased by commissions.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Each\u00a0Mutual Fund scheme has\u00a0a Direct Plan and a Regular Plan. If you invest in Mutual Funds through a broker or a distributor, you are investing in Regular Plans. All distributors like Scripbox, MyUniverse, Fundsindia, ICICI Direct, Bajaj Capital etc provide only Regular Plans. But when you invest through the Mutual Fund directly or take the [&#8230;]<\/p>\n<p><a class=\"btn btn-secondary understrap-read-more-link\" href=\"https:\/\/kuvera.in\/blog\/direct-plans-better\/\">Read More&#8230;<\/a><\/p>\n","protected":false},"author":3,"featured_media":490,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false},"categories":[91],"tags":[92,43],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Direct Plans vs Regular Plans : What does it mean and why should you care? - Kuvera<\/title>\n<meta name=\"description\" content=\"Direct Plans give better returns that the Regular Plans of the same Mutual Fund Schemes. 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