Regular Plan

What is Regular Plan?

A Regular Plan in mutual funds is an investment option where investors purchase units through intermediaries such as distributors, brokers, or financial advisors. These intermediaries receive a commission from the Asset Management Company (AMC) for facilitating the investment, which contributes to a higher expense ratio compared to Direct Plans.

Key Features of Regular Plans

• Intermediary Involvement: Regular Plans are acquired through financial advisors or brokers who assist investors in selecting suitable funds based on their risk profiles and investment goals.
• Higher Expense Ratios: Because of the commissions paid to intermediaries, Regular Plans typically have higher expense ratios. This means that a portion of the investment returns is used to cover distribution costs, which can affect overall profitability.
• Professional Guidance: These plans are ideal for investors who prefer professional assistance in managing their investments. Financial advisors provide ongoing support, portfolio monitoring, and advice on fund selection.
• Same Portfolio Management: Both Regular and Direct Plans of a mutual fund scheme share the same underlying portfolio and are managed by the same fund manager. The primary difference lies in how they are purchased and their cost structure.

Advantages of Regular Plans

1. Expertise and Support: Investors benefit from the knowledge and expertise of financial advisors who can guide them through complex investment decisions.
2. Convenience: Financial advisors handle various aspects of the investment process, including documentation and compliance (e.g., KYC requirements).
3. Personalized Investment Strategy: Advisors can tailor investment strategies to align with individual financial goals and risk tolerance, providing a more customized approach.

Disadvantages of Regular Plans

1. Higher Costs: The commissions paid to intermediaries result in higher expense ratios, which can reduce net returns over time compared to Direct Plans.
2. Dependency on Advisors: Investors may become reliant on financial advisors for decision-making, which could limit their understanding of the market and investment options.

Regular Plans vs Direct Plans

Feature	Regular Plan	Direct Plan
Purchase Method	Through intermediaries (distributors/brokers)	Directly from the AMC
Expense Ratio	Higher due to distribution costs	Lower as there are no intermediary fees
Professional Guidance	Yes, provided by financial advisors	No, investors manage their own investments
NAV Comparison	Generally lower than Direct Plans	Generally higher due to lower expenses