Series V-AMediumFund Distribution

How does a Direct plan of a mutual fund scheme differ from a Regular plan?

ADirect plans are only available to institutional investors
BDirect plans have a lower expense ratio because no distributor commission is paid, resulting in a higher NAVcheck_circle
CDirect plans are riskier than Regular plans
DDirect plans invest in different securities than Regular plans

Correct answer

B. Direct plans have a lower expense ratio because no distributor commission is paid, resulting in a higher NAV

lightbulbDetailed Solution

Both plans belong to the same scheme and hold the same portfolio. A Direct plan is bought without a distributor, so no commission is embedded in its expenses — giving it a lower TER and hence a higher NAV over time than the Regular plan of the same scheme.

Reference: NISM Series V-A Mutual Fund Distributors, Chapter 4.

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