Mutual Funds: Enjoy higher gains in direct plans

Direct plan vs regular plan: Difference in returns can be higher than that of their expense ratios

Most investors believe that the difference in performance between direct plans and regular plans of funds is equal to the difference in the expense ratio. But this is not always the case (see table). The difference in returns can actually be higher than the difference in expense ratio. This has implications for long-term wealth building. Investors should take this into account when deciding whether to invest in direct or regular funds. 

This difference arises because of the way the net asset value (NAV) is calculated. The NAV is the market value of the scheme's portfolio less any accrued liabilities (including