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    Q. What are two variants of a mutual fund scheme?

    Mutual fund houses offer their schemes in two options- regular plan and direct plan.

    Direct Mutual Funds are offered directly by the AMC or fund house with no involvement of third-party agents – brokers or distributors. There are no brokerage fees because there are no third-party agents involved. Resulting in a lower expense ratio of direct mutual funds and higher returns. These mutual funds can be purchased both online and offline.

    Mutual fund schemes under regular plans are purchased through an intermediary like brokers, advisors, and distributors. For selling their mutual funds, the intermediaries charge the fund house a fee. This fee is typically recovered by AMCs through expense ratio. The expense ratio is slightly higher for regulars mutual funds than for direct mutual funds. As a result, direct plans tend to have slightly higher returns. A regular plan is suitable for investors who do not have market insights or the time to track their portfolio.