Investor Corner/The asset classes/Mutual Fund Core Concepts
2.3.3 Scheme vs Plan
A scheme is the underlying investment strategy, such as large cap equity or short duration debt. A plan is the specific version of that scheme you actually buy, most commonly either Direct or Regular.
Two layers, often confused for one
An AMC might run a scheme called, for example, a flexi cap fund. Within that single scheme, an investor can typically choose between a Direct plan and a Regular plan. Both plans invest in exactly the same underlying portfolio of stocks or bonds; what differs between them is purely the distribution cost, not the investment strategy itself.
Why the same scheme can show two different NAVs
Direct and Regular plans of the same scheme have separate NAVs precisely because Regular plans carry a distributor commission built into their annual expense ratio, which the Direct plan does not. Over time this creates a growing gap between the two NAVs, even though the underlying investments are identical.
The practical decision
When choosing to invest in a scheme, the plan decision, Direct or Regular, is really a separate question about whether you want to pay for distribution and advice, covered fully in its own dedicated topic. The scheme decision, which strategy to invest in, is the one that should be based on your goals, time horizon and risk tolerance.
How PriLytics helps. PriLytics tracks the exact plan type, Direct or Regular, for every fund you hold, so the true cost difference is visible rather than buried in a factsheet. See holdings and returns.