How does DIRECT MF's earn more? Net difference between purchased NAV and sold NAV will be constant in both REGULAR & DIRECT funds?

@nithin I do not understand why DIRECT mutual funds are claimed to be earning more. The net difference between Net Asset Value when a fund is bought and sold should be constant for both REGULAR as well as DIRECT mutual funds. Expense ration will play a role at the very beginning of fund alone (NFO).

Example - If I buy a DIRECT mutual fund at a NAV of Rs 100 and sold when it is 120, then it is not different than buying the same mutual fund (but a REGULAR one) when it is at 99 and sold at the price of 119. Assuming that, regular plan will be at the NAV of 99 when direct plan is at 100 (considering 1% extra expense ratio of REGULAR fund).The net difference in either cases remain Rs 20.

Can you pls explain? :stuck_out_tongue:

Hi Wasim,

You can read the responses provided in the post below. Probably this will answer your question.

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@faisr Thank you for the heads up. So you mean, difference between Direct vs Regular NAV of a fund gradually rises over time?

Yes, because regular will constantly give away higher in commissions (expense ratio) every year than the direct.

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And another fruitful insight in the link below:

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And for that matter you will buy more units of a regular fund vs direct fund for a given amount, isn’t is? I think you should read that post mentioned by @faisr in this thread. And also in your example the nav of your regular fund wont be 119 after one year it will be 118 (assuming 1% expense ratio). Hope this helps.

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