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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Mutual Fund Scheme Selection

While selecting between a Regular plan and a Direct plan of the same scheme, which statement is correct?

The Direct plan has a lower expense ratio since no distributor commission is charged, and it invests in the same portfolio as the Regular plan. Because of the cost difference, the two plans have different NAVs.

  1. ADirect plan has a higher expense ratio because no commission is paid
  2. BRegular and Direct plans hold different portfolios
  3. CDirect plan has a lower expense ratio and therefore a different NAV from the Regular planCorrect
  4. DBoth plans always have the same NAV

Explanation

Both plans share one portfolio, but the Direct plan carries no distribution commission, so its expense ratio is lower. The lower costs lead to a higher NAV over time, so the NAVs differ.

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