InvestorQ : How to realize that it’s a direct mutual fund or a regular mutual fund?
sanjana Tulsiani made post

How to realize that it’s a direct mutual fund or a regular mutual fund?

Niharika Kamble answered.
12 months ago

A direct plan was introduced in 2013 by SEBI to give a choice to investors to directly invest in mutual funds. Earlier, an investor had to bear the agent commission paid from the fund even if he purchased units from the fund house directly without any involvement of brokers/intermediaries.

To give benefit to such investors, SEBI ordered fund houses to distinguish funds that can be purchased directly from the fund houses by prefixing "-direct" to the name of the funds. Such funds cannot include agent commissions in their expenses and hence the expense ratios will be lower than the regular funds.

As a result, investors can now directly invest in mutual fund schemes of direct plans without involving distributors or mutual fund brokers. They need to visit the AMC website and follow the process to invest in mutual fund schemes. There are no distribution fees or trail fees paid to brokers for such mutual fund schemes.

Due to this, the expense ratio becomes lower as compared to regular plans. The word "Direct" or "Regular" will be mentioned in the fund's name if it is a direct fund or regular fund, respectively. If the fund name does not have either of the words mentioned, it is a regular mutual fund.