Direct vs Regular Mutual Funds: The Real Cost

We should be upfront: Vikas Gupta is a mutual fund distributor, and distributors earn commission on regular plans. So here are the facts, and you can decide for yourself.

What is the difference?

	Direct plan	Regular plan
Portfolio and manager	Same	Same
Expense ratio	Lower	Higher, includes commission
NAV	Higher over time	Lower over time
Who helps you	You, or a fee-paid adviser	Your distributor
Bought through	Fund house, or direct platforms	Distributor

Direct plans have been available since January 2013, following SEBI’s rules.

How much does it cost over time?

Differences vary by fund. If a regular plan costs 0.75% more a year, ₹10,000 a month for 20 years could become about ₹99.91 lakh in the direct plan at an assumed 12%, against ₹90.32 lakh in the regular plan. That difference of about ₹9.59 lakh is the price of the service.

When does direct make sense?

You are comfortable choosing funds and reviewing them yourself.
You will stay invested in falls without someone talking it through with you.
You pay a SEBI-registered adviser a fee for advice instead.

When does regular make sense?

You would otherwise delay starting, or feel unsure about what to choose.
You want help with paperwork, KYC, nominations and family accounts.
Having someone to call stops you from selling at the wrong time. That one decision can be worth more than the cost.

How do I decide?

Ask what you are getting for the cost. A distributor should provide real, ongoing service. If you are not getting that, either ask for it or move on. Remember that moving from regular to direct counts as a sale, so check for tax and exit loads first.

Frequently asked questions

Are direct mutual funds always better?

They always cost less, and the same portfolio at lower cost gives a higher return. Whether they are better for you depends on whether you will choose well and stay invested without help.

Can I switch from a regular plan to a direct plan?

Yes, though a switch counts as a redemption, so it may trigger capital gains tax and an exit load. Check those costs before you move.

Mutual fund investments are subject to market risks, read all scheme related documents carefully. Mutual fund distribution by Korlipara Vikas Gupta, AMFI-registered Mutual Fund Distributor, ARN-178652. Distributors earn commission from fund houses on regular plans. Content and calculators on this site are for education, not personalised investment advice. Illustrations use assumed returns, which are not guaranteed.