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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Fund Distribution and Channel Management Practices

Which of the following is a feature of the direct plan of a mutual fund scheme compared with the regular plan of the same scheme?

A direct plan carries no distribution commission within its expense ratio, so its expense ratio is lower than the regular plan of the same scheme. The portfolio is identical, and the plan is bought directly from the AMC rather than through a distributor.

  1. AIt has a higher expense ratio because of distribution costs
  2. BIt has no distribution commission built into the expense ratioCorrect
  3. CIt has a different portfolio of securities
  4. DIt can be bought only through a distributor

Explanation

Direct plans are purchased directly with the AMC without a distributor, so no commission is paid and the expense ratio is lower. The portfolio is the same as in the regular plan, so the NAV differs only because of expenses.

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