MF Corner: Key things to know about direct and regular mutual funds

A direct plan refers to the direct buying of a mutual fund scheme from the asset management company (AMC) or the fund house. Whereas a regular plan is what you buy through an intermediary like an independent advisor, a broker, or even a mutual fund distributor.

Since the direct plan is bought from the AMC, they will only charge the basic fees. In regular plans, because the intermediary also adds a service of convenience as well as provides guidance etc. they are paid a commission by the AMC.

As of June-end 2022, Association of Mutual Funds in India (AMFI) data shows that off the over 20 lakh crore that individual investors hold in mutual funds, roughly 22 percent now comes from the direct channel.

Of this 22 percent, 18 percent comes from the T-30 or the top 30 cities and here too, it is highly skewed to just a clutch of cities. Only 4 percent comes from B-30 cities, which refers to the cities beyond the top 30.

For now, distributors still control nearly 80 percent of the individual investors kitty.

In this episode of 'Mutual Fund Corner', Kushal Bhagi, a Personal Finance Consultant talks about direct and regular plans and suggests which one should be in the portfolio.