What are "Direct Mutual fund" plans?

Recently the Indian capital market regulator SEBI or Securities & Exchange Board of India announced plan to introduce Direct Mutual fund plans  from 1st January 2013. Reacting to this announcements some of the fund houses have either increased or tweaked the exit loads for some of the mutual fund schemes. On top of that some of the investor who wish to invest in direct plan (through transfer) are made to pay the exit loads, whereas others are simply allowed without paying a dime.  The simple logic behind this is the time duration for which investor  remained invested in the fund and the mode of application. If you applied with the AMC directly prior to Jan 1 then you need not pay any exit load to transfer to Direct plan. On the other hand if you invested through an agent then you need to pay the exit loads prevalent at that time.

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What is a Direct mutual fund plan?

A direct mutual fund plan is one in which you directly approached the asset management company (AMC) or mutual fund house and invested with them without the help of any agent or broker. This non-intervention of intermediary leads to lesser expense ratio for the fund hence a slightly higher NAV or net asset value.  However the normal plans will continue to be distributed through brokers & distributors.

So from this article it's pretty clear that not all investors end up paying the same exit loads. This depends on the date on which we invested and entered in the contract with the AMC. Even if the AMC changes the exit loads during the course of time, you are only bound by the exit loads mentioned in the schemes offer document. So the next time you plan to invest in a new mutual fund don't forget to invest some time reading the offer document and acquaint yourself with the various charges associated with the scheme. SEBI has always protected the investor rights and direct plans are another step in the right direction.