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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, as compared with the 'Regular Plan'?

A Direct Plan has no distribution commission built into its expenses, so its expense ratio is lower than that of the Regular Plan and its NAV is generally higher. It is meant for investors investing directly with the AMC, and returns are still not guaranteed.

  1. AIt carries a higher expense ratio because the AMC bears the cost of investor servicing
  2. BIt can be purchased only through a registered distributor
  3. CIt has no distribution commission built into the expenses, so its expense ratio is lowerCorrect
  4. DIt always gives a guaranteed higher return than the Regular Plan

Explanation

Direct Plans are for investors who invest directly with the AMC without a distributor, so no distribution commission is charged to the scheme. Hence the expense ratio is lower and NAV is generally higher. Returns are not guaranteed.

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