Mutual funds are usually chosen based on two terms ‘Direct Plan’ and ‘Regular Plan‘. An investor manages his portfolio through directly investing through a fund manager or through supervising investment through a distributor’s fund or manager.
In case of direct investment because of the lower expense ratio, the returns automatically get high in comparison to regular funds, where the ratio might be greater. However, there are more benefits rather than any drawbacks when you choose direct plans over any other investments.
Here are some key considerations of choosing direct plans:-
- The less expense ratio (>1%) is highly compatible when it comes to returns.
- The compound interest give a massive boost in the long-term returns.
- If you have invested in your portfolio for 10 years or more, you can easily switch to tax free returns.
- One can file for a direct plan both physically or in online mode.
Overall, the direct plans are suitable for any person who wants to gain substantial returns over an estimated period of time in their portfolio. Also, it is friendly with the provisions of income tax increasing the capital gains of the investor.
