FPSB Investment Planning Specialist Practice Questions - FPSB Investment Planning Specialist Exam (FPSB India) Exam

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Which of the following statements best describes the primary benefit of a 'Direct Plan' compared to a 'Regular Plan' of the same mutual fund scheme in India?

Direct plans have a lower Total Expense Ratio (TER) because no distributor commission is paid, leading to higher compounding returns over time. Direct plans are managed by senior fund managers, whereas regular plans are managed by junior associates. Direct plans have lower portfolio turnover rates and lower tracking error compared to regular plans. Direct plans are exempt from capital gains tax upon redemption, unlike regular plans.

Correct Answer:

Direct plans have a lower Total Expense Ratio (TER) because no distributor commission is paid, leading to higher compounding returns over time.

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