Direct vs Regular Mutual Funds: Why Direct Plans Save You Crores
Understand the difference between direct and regular mutual fund plans and why most Indians should choose direct.
The Hidden Cost of Regular Plans
When you invest in a mutual fund, you can choose between two variants of the same scheme: Direct and Regular. The only difference is the expense ratio — but over 20 years, this difference can cost you ₹30–50 lakh on a ₹10,000/month SIP.
Key Differences
| Feature | Regular Plan | Direct Plan |
|---|---|---|
| How purchased | Through agent/broker/bank | Directly from AMC or app |
| Expense ratio (typical equity fund) | 1.5–2.5% | 0.1–1.0% |
| NAV | Lower | Higher (same fund, better price) |
| Commission | Agent earns 0.5–1.5% annually from your investment | None |
| Advice | Agent advises (may have conflict of interest) | Self-managed |
The Math: How Much Direct Plans Save
SIP: ₹10,000/month | Tenure: 20 years | Gross returns: 12%
- Regular plan (expense ratio 1.5% → effective return 10.5%): Final value ~₹76 lakh
- Direct plan (expense ratio 0.5% → effective return 11.5%): Final value ~₹88 lakh
- Difference: ₹12 lakh over 20 years
For larger SIPs (₹50,000/month): Difference can be ₹50–60 lakh.
Where to Buy Direct Plans
- Groww: Zero commission, good UI, most popular in India
- Coin by Zerodha: ₹50/month subscription, direct plans only
- MF Central (mfcentral.com): Official industry platform
- AMC websites directly: HDFC MF, ICICI Pru AMC, SBI MF — buy directly
- Kuvera: Free, direct plans, goal tracking
Who Should Stick with Regular Plans?
If you genuinely need personalised financial advice from an advisor (SEBI-registered), paying for it through a regular plan's expense ratio may be worth it. But most investors benefit more from learning to invest in direct plans independently through index funds, which need no active management decisions.
How to Check if Your Fund is Direct or Regular
Look at the fund name: "Scheme Name — Direct Plan" vs "Scheme Name — Regular Plan." Also check the plan in your account statement. If you're not sure, log in to CAMS or Karvy (now Fintech) to see all your mutual fund investments.