What is the difference between direct growth plan and growth plan

There are two kinds of mutual fund plans – direct plan and regular plan. If you invest in a mutual fund scheme directly with the fund house, either online or by going to the website of the AMC or website of Registrar and Transfer Agents (e.g. CAMS, Karvy etc), or offline by visiting the office of the AMC or the RTAs, you will invest in direct plan.

If you invest in a mutual fund scheme through a mutual fund distributor, then you will invest in regular plan. The mutual fund distributor provides services with respect to helping you fill up application forms, submission to the AMCs, as well as ongoing services, while direct plans are self service oriented. From a cost perspective, costs (expense ratios) of direct plans are lower than costs of regular plans. Hence, you will get slightly higher returns by investing in direct plans compared to regular plans.

While direct and regular plans are two different channels of investing, growth and dividend are two profit distribution options of a scheme. In the growth option, the profit made by the scheme is re-invested in the scheme and you will benefit through capital appreciation. In dividend option, the profit made by the scheme, partially or fully, is paid to the investors at an interval/s as decided by the fund manager.

“Direct growth” means investing in growth option of a scheme through a direct plan, while “Growth” means investing in growth option of a scheme through a regular plan. Needless to say the expense ratio of “Direct Growth” will be lower than “Growth”.

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