Why choose Direct plans in Mutual Funds ?

Direct Mutual funds have completed more than 10 years in India and still the penetration of direct plan still lower than regular plans . Only 23% of individual mutual fund investments come by way of direct plans while the rest is being through distributors or agents.

Investing in direct plans means you’re dealing directly with the fund house, which typically results in lower expense ratios and fees. Differenece in expense ratio of regular and direct plan ranges from 0.5% to 2% since direct plan do not pay commissions to agents , as a result  - direct plan will give that much higher CAGR return than the regular plan.

The NAVs of direct plans are higher than the regular plans. Direct plans have lesser costs and give higher returns over regular plans. Over a sufficiently long investment horizon, the difference in returns can be substantial

A simple illustration . A monthly investment [lan of Rs.10000 every month for 10 years will generate an amount of 28.1 lacs in direct plans while in regular plan , this amount will be 26.6 lacs - 1.5 lacs less which is huge sum.

As per SEBI report , 66% of direct plan outperformed their benchmark in a 10 yr period while only 39% of regular plans managed to do so.