When an investor directly buys a fund from an AMC its called a Direct Plan. Also, the Net Asset Value is higher for direct plans. In a Regular Plan, the investor buys the mutual fund through an intermediary – agent, broker or distributor.
|Feature||Direct Plan||Regular Plan|
|Net Asset Value||Higher||Lower|
|Portfolio Tracking||Self Driven||Advisor Driven|
|Market Awarness||Self Driven||Advisor Driven|
|Documentation and KYC||To be submitted on your own||Services fulfilled by advisor|
Switching from regular to direct plans
If you are a confident market-savvy investor who is well capable of managing your investments by reviewing them from time to time, then Direct Plans are for you. One main advantage is that Direct Plans come with lower expense ratios. The advisory charges are zero.
How to switch from regular plans to direct plans?
- Online: Using the mutual fund account login, select the ‘switch’ option on the transaction page and select the fund name that you would like to change to the ‘Direct Plan’ option. It would take a minimum of 4 days to reflect the change in your account.
- Offline: By visiting the AMC branch in person one can easily switch between plans. Ask for a ‘Switch Form’ and fill the required details along with the Folio number and Fund Name. Upon processing the form, the updated account statement will be sent to you. This process can be done through your intermediary as well.
Things to Consider When Switching from Regular to Direct Plan
- Lock-in Period: Only upon finishing the lock-in period the regular plan can be transferred to direct plan. For example, ELSS funds come with a lock-in of 3 years, only upon completion of the 3-year lock-in the scheme can be switched to direct plan.
- Exit Load: Equity, Debt and Hybrid schemes have exit load for varying time periods. Therefore, to switch, you need to ensure that your current plan doesn’t feature any exit load. Otherwise, it would just reduce your redemption value.
- Taxation: Switching between plans is considered redemption. Therefore, such a switch would attract capital gains tax.
Switching from direct to regular funds
If you fall into the category of investors who had started investing on their own and now find it cumbersome to manage your investments, shifting to regular funds is the best bet. Only with a nominal charge of less than 1%, these experts help you with your investments to maximize returns.
How to switch from direct plans to regular plans?
Are you finding it difficult and time-consuming to maintain and manage your investments? The best option is to switch to regular plans and seek the help of certified advisors. With just a nominal additional charge, the advisors will help you with your investments. The procedure remains the same as above. However, the difference being in the option in the form. ‘Switch From’ option changes to direct while, ‘Switch To’ option shows a regular plan.
Advantages of switching from direct plan to regular plan
- Trusted Advice: With regular plans, you will get trusted advice from certified advisors whose recommendations would help you achieve higher returns. These recommendations would be tailor-made to match your financial and investment goals.
- Regular Review and Re-balance: It’s not about just investing, its about having the right mix of investments throughout your investment tenure. Therefore, periodic review and re-balancing are suggested by these experts in order to keep your financial goals on track.
- Value-Added Services: Additional services like account changes, investment enabling, portfolio mapping etc. would be provided for your convenience.
Should you switch or no?
Irrespective of whether you are switching from direct to regular or vice versa, it means that you are selling the current units and purchasing units under the new scheme. Therefore, before making the decision, consider lock-in periods, exit loads (if any) and tax implications.
Switching to a direct plan should be done only when you are ready to manage your investment portfolio by periodically reviewing and re-balancing it. Otherwise, regular plans should be your best friends. Do not worry about the 80-90bps that you are paying. Look at the brighter side of the higher returns that you would earn and additional services you can avail.
Don’t just switch because Direct Plans are cheaper. Benefits of regular funds out weights that of the direct ones.