How To Start a SIP - Direct Plan or Regular Plan

Welcome to Amazing Adviser and in this article I'm going to tell you how to start a SIP or systematic installment Purchase. If you don't know what is SIP you can check this link here.

What is SIP? It's Advantage and Disadvantage

You must possess PAN Card to start SIP. There are two ways. (i) Direct Plan (ii) Regular Plan. Let's understand what are these.

  1. Direct Plan - In direct plan you buy SIP directly from a company. In simple language I explain it as love marriage because no one will guide you, no one will inform you, no one will ask you for Direct SIP. You choose on your own, you invest on your own and you exit on your own. No one will interfere between you and your money. You can visit any company website who are providing SIP and directly purchase from there. Example of Direct Plan providers are Zerodha, Paytm money, MyCAMS
  2. Regular Plan - Opposite to this, Regular plan means you will invest or purchase SIP through a middle man, normally known as broker or agents or mutual fund distributor. Oh yes, this is arranged marriage where many peoples are interested in your investment. Basically they earn a commission from the company for your every rupee of investment. In addition to that they earn commission when your investment grows over time. If anyone has ever asked you to start a SIP then he is telling you about Regular Plan and not Direct Plan.
Frankly speaking always invest through Direct Plan.I don't think you want to give your money to other person for free. Company give commission from your profit to the mutual fund distributor and agents. I'm giving an example that how choosing between Direct and Regular can affect your investment.

There is a fund called ABSL Tax Relief 96 fund. Talking about it return in last year you would have got 18.2% in Direct plan whereas 16.8% in Regular plan. So if you had invested ₹100000 then the difference between both plan's return is ₹1400. That means this ₹1400 is the commission your agent earns from your investment. 

In the end it is always your decision that how you want to invest in SIP and mutual funds. There may be some other reason that people prefer regular plan. But in my opinion direct plan is the future of mutual fund industry. With awareness more and more people will invest through Direct Plan.

Thank you
Happy Investing

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