Regular Funds:
HDFC Top 100 Fund - Regular Plan
SBI Bluechip Fund - Regular Plan
ICICI Prudential Equity & Debt Fund - Regular Plan
Direct Funds:
HDFC Top 100 Fund - Direct Plan
SBI Bluechip Fund - Direct Plan
ICICI Prudential Equity & Debt Fund - Direct Plan
Let's take HDFC Top 100 Fund as an example. As of April 2023, the expense ratio for the regular plan of this fund is 2.04%, while the expense ratio for the direct plan is 1.24%. This means that investors in the regular plan will pay a commission of around 0.75% to their distributors, while investors in the direct plan will not have to pay any commission.
Assuming an investment of Rs. 1,00,000 in HDFC Top 100 Fund for a period of one year, with a return of 10%, the returns for the regular plan and direct plan would be:
Regular Plan:
Investment amount: Rs. 1,00,000
Expense ratio: 2.04%
Commission paid to distributor: Rs. 750
Return on investment: 9.16%
Final value: Rs. 1,09,160
Direct Plan:
Investment amount: Rs. 1,00,000
Expense ratio: 1.24%
Commission paid to distributor: None
Return on investment: 9.76%
Final value: Rs. 1,09,760
As we can see, the returns for the direct plan are higher due to the lower expense ratio, and the investor does not have to pay any commission to the distributor. However, the investor has to do their own research and analysis in the absence of a distributor.
In summary, regular funds and direct funds differ in terms of the commission charged to investors and the expense ratio. Direct funds generally have lower expense ratios and higher returns, but investors need to do their own research and analysis.