Why regular mutual fund is better than direct? (2024)

Why regular mutual fund is better than direct?

Both the options – direct plan and regular plan are managed by the same mutual fund manager. They invest in the same assets as well. However, the major difference is that in a regular plan, the fund house pays commission as a distribution fee. While in the direct plan, there is no such commission or fee.

Which is better regular or direct mutual fund?

As the regular fund has a higher expense ratio due to the commission and brokerage involved, the NAV of the regular schemes is generally lower than the direct plans since there is no commission or brokerage in direct plans. Returns: Direct plans offer higher returns due to a lower expense ratio than regular funds.

Why mutual fund is better than direct investment?

Knowledge and Expertise: Direct stock market investments require adequate knowledge and expertise, whereas mutual funds provide professional management for those who lack the time or expertise to manage their investments actively.

Why would anyone buy regular mutual fund?

As a regular mutual fund investor, you will get a few additional services from intermediaries for your convenience. This includes providing tax proofs during tax filing, keeping a record of your investments, and so on. Unlike regular mutual funds, direct mutual funds do not offer these additional services.

What are the disadvantages of direct plan mutual fund?

Difficulty in Selecting Schemes: There are several mutual fund schemes offered by various AMC's in India. It is not easy to select one scheme in all the suitable schemes. Often, direct investors select schemes based on past performance without analysing other factors.

When should I switch from regular to direct mutual fund?

Only after the lock-in period of the regular plan has ended, can you switch to its direct plan. Equity-linked savings schemes (ELSS) have a mandatory lock-in period of three years. One cannot switch from a regular to a direct plan, even of the same scheme during the lock-in period.

Should I switch from regular to direct plan?

One main attraction of direct funds is that investors will not have to pay commission. In the case of regular funds, the fund house adds your advisory charges to the expense ratio. If you are a market-savvy investor with a keen interest in finance, then direct funds can be the right choice for you.

Can I change my mutual fund from regular to direct?

Yes, you can either switch to the direct plan of the same mutual fund you have invested in or any other direct mutual fund of the same AMC.

Who should invest in direct mutual funds?

In short, Direct Plan is suited for those who understand what kind of mutual funds are needed for different kinds of investment needs, are capable of researching these independently and able to identify/shortlist the funds to invest in, and then go through the process of actually investing without the help of an ...

What is the main disadvantage of direct investment?

Some potential disadvantages of foreign direct investment (FDI): The host country can lose control over its economy, and people may lose jobs if companies relocate production to lower-cost countries.

Why not to choose regular mutual fund?

Direct mutual funds typically have a higher NAV due to their lower expense ratio. This lower expense ratio in direct funds allows a larger portion of your investment to actively generate returns, potentially leading to higher overall returns compared to regular funds with higher expense ratios.

How much commission does regular mutual funds take?

The commission for mutual fund commission ranges between 0.1% to 2% of the number of units purchased by the investors. This commission is based on many factors which re highlighted below.

How much commission goes in regular mutual fund?

In regular mutual funds, the sales commission is paid to intermediaries or brokers who get business for them. The amount of commission varies between 1% to 1.25% a year. Although your monthly statement doesn't reflect this amount, the NAV or net asset value of your mutual fund units will be adjusted accordingly.

Which mutual fund is best?

How much cost difference between direct and regular mutual fund?

In a regular mutual fund scheme, you invest through an intermediary, such as a broker or distributor. Direct plans have an expense ratio that's lower by roughly 0.6–1% compared to their regular plan counterparts.

Does switching funds trigger tax?

If you switch out of an equity fund, your gains will be taxable similar to equities. Short-term capital gains tax will be levied for gains if you switch within one year. In contrast, long-term capital gains tax will be levied for gains above Rs 1 lakh if you switch after one year from the investment date.

Does switching from regular to direct mutual fund taxable?

Yes. Since switching of mutual funds from a regular to a direct plan is considered as redemption, the taxation rules while switching the plan is similar to that applied while redeeming. If equity-based mutual funds are held for more than a year then they are not taxable for the investor.

What are the tax implications of switching from regular to direct funds?

Capital Gains Tax

Since switching from regular funds to direct mutual funds is considered as a new investment, the switch can attract tax on capital gains. The applicable taxes can also vary depending on the type of capital gains i.e. long-term or short-term capital gains.

Is there any charge for switching mutual funds?

Whenever you switch from regular to direct mutual funds, exit loads are inevitable. They are the percentage value charge if you redeem the fund before its investment duration is complete. The charges can be anywhere between 0-2%, depending on the type of fund.

What are the benefits of switching mutual funds?

At times, the fund of your choice might perform unsatisfactorily, or you may come across a comparatively better scheme. In such situations, you can move your money fully or partially from one mutual fund scheme to another. This process is known as switching.

How do I sell regular mutual funds?

Most AMCs have a dedicated web portal, mobile application, and relationship manager for their investors. If you have purchased your mutual fund units through an AMC, you can simply log in to the portal/app and select the mutual fund and the units you want to redeem. You can choose to sell some units or all.

How do I cancel my regular mutual fund?

● Reach out to an agent

The agent will place the cancellation request on your behalf. The agent will reach out to the AMC managing the fund and request a cancellation. Once the request is processed, they will inform the investors.

Can you take out mutual funds at any time?

You can generally withdraw money from a mutual fund at any time without penalty. However, if the mutual fund is held in a tax-advantaged account like an IRA, you may face early withdrawal penalties, depending on the type of account and how the mutual fund has performed.

How often can you exchange mutual funds?

A common type of investment company, mutual funds are open-end funds, meaning that investors can purchase and redeem shares in the funds on a daily basis based on the net asset value (NAV) of their shares.

Which mutual fund is best for 2024?