Read this if you are investing in Mutual Funds from PhonePe !!
In India, every mutual fund scheme is offered in two plans
Direct Plan
Regular Plan
For ex., the mutual fund scheme “Axis Bluechip Fund-Growth” is offered in two plans
Axis Bluechip Fund-Growth - Direct
Axis Bluechip Fund-Growth - Regular
Let’s first understand what is Expense Ratio is.
Expense Ratio
This is the fees charged by the Mutual Fund company for managing the mutual fund scheme.
For managing the “Axis Bluechip Fund-Growth” scheme, Axis Mutual Fund charges fees from the investors of this scheme, and that fee is called Expense Ratio.
With that understanding, let’s understand what is the difference between two different plans.
Direct Plan
This plan has
Less Expense Ratio compared to Regular Plan
No intermediary or broker
High returns in long term
Regular Plan
This plan has
High Expense Ratio compared to Direct Plan
Commission is paid to the broker by Mutual Fund scheme
Less returns compared to Direct Plan
Below is a snapshot from VRO highlighting the difference in expense ratio between both plans
To conclude, investments in Direct Plan gives more returns than Regular Plan
Investing from PhonePe
PhonePe offers investments in Regular Plans. They don’t offer Direct Plans.
It is clearly mentioned in their terms and conditions.
Click here to view PhonePe Wealth’s full Terms & Conditions.
Should I stop investing from PhonePe?
PhonePe suggests mutual funds based on the investor’s risk profile. If you are following those suggestions and if that model has benefitted you, you may continue investing from PhonePe.
If you do your own research in selecting mutual funds, and you use PhonePe just to invest, you may check out few alternatives to PhonePe like Groww, PaytmMoney, MFU India, etc. that offer Direct Plans or you can invest directly in the Mutual Fund’s website as well.
More References
To learn more about Direct Plan and Regular Plan, check out these articles
https://www.jagoinvestor.com/2013/04/direct-plan-in-mutual-funds.html
https://groww.in/blog/direct-vs-regular-mutual-fund-reasons/
https://www.paytmmoney.com/mutual-funds/direct-vs-regular-plans
I would love your feedback. You may reach out to me on hemanth.finshare@gmail.com or on Twitter
Disclaimer
The author is not affiliated with any schemes, products, apps referenced in this article. The author is not a registered financial advisor. This blog is only for educational purposes and should not be considered as Investment advice. Please consult your financial advisor before making any financial decisions.