1. Direct and regular plans can hold the same portfolio
Within the same scheme, the underlying strategy is generally the same. The key difference is how the investor accesses it and the associated distribution cost.
Tip: Do not confuse plan type with fund category.
2. Direct plans generally have lower expense ratios
Direct plans are purchased without the regular distributor commission route, so their expense ratio is usually lower.
Tip: Lower cost can improve long-term retained return.
3. Regular plans can bundle distribution and service
Some investors use advisers or distributors for planning, behaviour coaching or service. The value of that help should be assessed against its ongoing cost.
Tip: Pay for advice knowingly, not invisibly.
4. Switching can create tax and exit-load consequences
Moving from regular to direct can be treated like redemption and fresh purchase for tax and exit-load purposes. Check consequences before switching.
Note: Lower future cost does not erase switching cost.
5. Quick check
Direct and regular plans of the same scheme mainly differ in what?
Answer: B - The underlying scheme may be the same while cost and access route differ.