So far we have discussed what are mutual funds? We will also discuss what are the different types of mutual funds. Now, we come to the question of how does an investor invest in mutual funds. So, for investing in mutual funds investor needs to opt for investment plan. We will take a look at what our investment plans in this video. To invest in mutual funds, the investor has to choose between two or two options, whether you'd like to use a direct plan or a regular plan.

We will look at each of these in some details. When an investor buys directly from the mutual fund company or the AMC, we say that the mutual the investor is invested in a direct plan. We will see that there are some advantages of this. So, normally every AMC has a website through which investments can be made in that in their mutual funds available for the AMC or they also Have Kelly calling facility using which a investor can invest in the mutual fund of his choice, which is provided by that particular AMC. Now, we look at regular plans, when an investor invests in mutual funds through an intermediary, the intermediary can be advisor, a broker or a bank, etc. Then he is investing or in a regular plan.

Now, the intermediaries like we discussed can be many types normally all banks are intermediaries also all the stock broking houses they will act as intermediaries in India it is mandatory that the intermediaries be discouraged to be able to serve as intermediaries. So, here also they are extremely safe because they're all registered intermediaries who are authorized by The Government of India, this was the case in all other countries as well. The AMC is Pay Commission to the intermediaries. The Knesset net asset values of the direct plans are and the regular plans are usually different. For every mutual fund the net asset value of direct plan and the regular plans are listed separately. Now we'll discuss the advantages and disadvantages of the direct plan.

The same breath we will discuss the advantages and disadvantages of the regular plan as well. We will see that what is an advantage for the direct plan are actually disadvantages to the regular plan and vice versa. The biggest advantage of a direct plan is that the expense ratios are less. We will talk about expense ratios more at the later point of the course. However, for now, it is sufficient to understand that sense in a direct plan this is no need to pay commissions or any other expenses, the savings are passed on to the investors. So, these amounts to a huge amount if the investor stays invested for a very long time, the reverse happens in the case of a regular plan, since there are commissions etc charged by the intermediaries, so, the expense ratios are more and thus the returns are less than the direct plan.

Very notice the navs offer direct plan and a regular plan of the same mutual fund you will see that the nav of a direct plan is always greater than the nav or they will have planned for the same mutual fund. So when the investor stays invested in a particular mutual fund for a very long term, the savings on a direct plan are much more and does the returns from the direct plan investment are much higher as compared to that through a regular plan. However, the main disadvantage of the direct plan is that the investor needs to do all the work by himself, that is the during the process of buying selling all the paperwork etc needs to be done by the investor himself or by herself. Now, normally when you have a intermediary in between, they will conduct all these activities for the investor. Also the important point is that the intermediaries are normally good advisors as well.

This needs to be taken with a pinch of salt, but now what is the inverse the intermediaries will pass on research results etc which can help the investor in making good investment choices. This option of getting advice regarding when to buy when to sell, how much to buy, how much to sell, etc is not available when the investor invests through a direct plan. This is only available to investor when he invests through a regular plan. Thank you for watching, see you in the next lecture.