Mutual Fund Compare

Direct vs Regular mutual funds: what is the difference?

Written and reviewed by Omm · Last reviewed · General information, not investment advice

Every mutual fund scheme in India is available in two plans: Regular and Direct. They invest in the same securities and are managed by the same team. The only difference is the cost.

What changes

  • Regular plan: bought through a distributor, bank or platform that is paid a commission. That commission is paid out of the scheme’s expenses, so the expense ratio is higher.
  • Direct plan: bought straight from the fund house or from a platform that does not take a commission. There is no distribution cost, so the expense ratio is lower.

The extra cost shows up every day as a slightly lower NAV growth. Because the two plans have the same portfolio, the Direct plan’s NAV is always higher than the Regular plan’s for the same scheme.

Why a small difference matters

The gap in expense ratio is often around half a percentage point to a full point for equity funds, and it compounds. Using the SIP calculator with an assumed 1 percentage point difference, a SIP of ₹10,000 a month for 20 years (₹24,00,000 invested) grows to about ₹99.9 lakh at 12% a year and about ₹87.4 lakh at 11%, a difference of about ₹12.6 lakh. For a one-time ₹1,00,000 over 20 years, it is about ₹9.6 lakh against ₹8.1 lakh.

These are illustrations based on assumed returns, not forecasts. The point is that a cost difference that looks small each year adds up over decades.

How to tell which is which

The scheme name usually says “Direct Plan” or “Regular Plan”. On this site the screener shows the plan under every fund name and filters to Direct plans by default so that like is compared with like. Mixing the two in one comparison would make the Regular plans look worse purely because of their cost.

Which should you choose?

If you are comfortable choosing funds and investing online, a Direct plan saves the commission. If you value personal guidance and would otherwise not invest at all, a Regular plan through an advisor may still be the better outcome for you. Registered investment advisers charge a fee directly instead of taking a commission, which is a third route.

This is general education, not advice for your situation.

Frequently asked questions

What is the difference between Direct and Regular plans?

Both plans of a scheme hold exactly the same portfolio and are run by the same fund manager. A Regular plan is sold through a distributor and pays them a commission from the fund's expenses. A Direct plan has no distributor commission, so its expense ratio is lower and its NAV is higher.

Are Direct plans better?

A Direct plan costs less, so for the same portfolio it gives a higher return. The trade-off is that you choose the fund and handle the paperwork yourself, without a distributor's help or advice. Whether the advice is worth the cost is a personal decision.

Since when have Direct plans existed?

SEBI introduced Direct plans from 1 January 2013.

Can I switch from Regular to Direct?

Yes, by redeeming the Regular plan and investing in the Direct plan of the same scheme, or through a switch. This is a redemption, so it may trigger exit load and capital gains tax. Check the cost before switching.

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