Comparison of Direct and Regular Plans in the Top 5 Flexi Cap Mutual Funds

Mutual funds have become the talk of the town as many individuals are opting for this route for saving and wealth creation. However, there is a lot of talk about when one should start investing. Of course, the earlier you start, the better it is, but one thing still puzzles many: the mention of direct and regular mutual funds.

In this blog, we will look into the difference between the two and also the difference in expense ratios of top flexi-cap funds by AUM. When you invest in a mutual fund scheme, the fund house charges you an annual fee for managing your money. This annual fee, known as the expense ratio, covers all expenses, including management fees and operating expenses of the fund. This expense ratio is a small part of your total investment value. The mutual fund company levies this expense ratio on your daily investment value and collects fees from it. This means that a mutual fund scheme or plan with a lower expense ratio will always be beneficial to an investor, as the asset management company will take less money from the returns generated.

The difference between direct and regular plans of mutual funds: In regular plans, you invest through an intermediary like a financial advisor or your bank relationship manager. Mutual fund companies have to pay agents commission until the time you stay invested. This becomes an additional cost for fund houses, and therefore they charge a higher expense ratio, resulting in lower returns for investors. Alternatively, you have the option to buy direct plans directly from the mutual fund company. Since there are no such commissions to be paid, that means a lower expense ratio and higher returns.

1. Parag Parikh Flexi Cap Fund

The expense ratio for the Parag Parikh Flexi Cap regular plan is 1.32%, while that of the direct plan is 0.57%, so the difference is about 0.75%.

2. HDFC Flexi Cap Fund

The expense ratio for the regular plan of HDFC Flexi Cap Fund is 1.51%, while that of the direct plan is 0.81%, so the difference is about 0.7%.

3. Kotak Flexicap Fund

The expense ratio for the regular plan of Kotak Flexicap Fund is 1.48%, while that of the direct plan is 0.63%, so the difference is about 0.85%. This difference is the highest among the top five mutual fund schemes.

4. UTI Flexi Cap Fund

The UTI Flexi Cap Fund’s expense ratio for the regular plan is 1.66%, while that for the direct plan is 0.9%, so the difference is about 0.76%.

5. SBI Flexi Cap Fund

The SBI Flexi Cap Fund regular plan’s expense ratio is 1.69% and 0.85% for the direct plan, with a difference of 0.84%.

The difference between the regular plan’s expense ratio and the direct plan’s expense ratio in the above-mentioned schemes is anywhere between 0.7 to 0.85%, which one should take note of, as the saying goes, “A penny saved is a penny earned.”

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.