When you get sick, do you directly go to a medical store or visit a doctor, get consulted, and then as per his prescription buy medicines? Well, it’s quite predictable that you’ll pay a visit to a doctor first, as you wish to get recover soon.
Though visiting a doctor requires you to pay a consultation fee, but eventually, you know that you’ll recover fast knowing that you have expert advice. But when you go on your own, the risks of getting the wrong medication or say, a wrong judgment of illness might hamper your sickness.
The same scenario is with Regular Mutual Fund and Direct Mutual Funds. The regular mutual fund works like a doctor when it comes to mutual funds with the help of professional financial advisors.
The distinction between Direct and Regular Mutual Fund
What is a Direct Mutual Fund?
A direct mutual fund or direct plan is directly purchased from an Asset Management Company (AMC) without any interference from any mediators like brokers, agents, etc. Also, there is no role of nominal fees or distribution fees that brings down the expense ratio of the investors.
It is a solo journey of an investor. For investing through direct mutual funds, you should be prepared to research and gain knowledge about mutual funds. Through this, you will be solely responsible for handling your fund from its initial stage.
Surely, you will save its expense ratio, but eventually, you’ll end up with a lot on your plate to manage. For instance, its application process, portfolio review, documentation, tracking of trends, and lastly, compliance issues. Comparatively, the returns with direct mutual funds are higher than the regular but again, expert knowledge is required to track the volatility of the market, and the performance of your portfolio.
Journey through direct mutual funds will be a solo one, so if you are confident with your research then my friend, hop on this journey!
What is a Regular Mutual Fund?
A Regular Mutual Fund, as stated above is like a doctor who charges fees but saves you from sickness with the best medications as per his expertise. Here, the funds are bought via a mutual fund broker, distributor, or financial advisor.
A nominal fee is paid by the fund house to the mediator for introducing a new investor to their plan. These funds are slightly more expensive than the direct ones as the AMC adds this nominal fee to the expense ratio.
But as they say, “the best things in life are actually expensive”, this is the case with regular funds too. Unlike, being a one-man army in this investment journey, here you actually have a professional confidant. An investment advisor will guide you through your entire investment journey to solve the hard work on your end.
The best part is it doesn’t matter whether if you have no knowledge about the market, the risks involved, or what are your financial goals. Want to know why? Well, with a financial advisor involved, they will take the load off your shoulders and will
- know what mutual fund plan suits you best
- monitor the market for you regularly
- keep a record of your investments
- provide tax proofs during tax filing
- modify the plan if required, etc. all for a nominal fee.
Aren’t financial advisors a whole package?
Well, No Doubt they are!
Also Read: What is The Difference Between Direct and Regular Mutual Funds?
BOTTOM LINE
If you are a person who believes you don’t require a doctor to take care of your sickness or if you believe you have the apt knowledge of the market, then Direct Mutual Funds are best suited for you.
But if you are someone, who believes that taking professional help is important, whether it’s for your sickness or mutual fund investments, then Regular Mutual Funds is for you! Just with a nominal fee you can be stress-free and could enjoy the journey of your investment, leaving behind the worries for financial advisors!!
