Direct vs Regular Mutual Funds: What's the Difference?

The difference

Since 1 January 2013, SEBI has required every mutual fund scheme to offer a direct plan, bought directly from the AMC or through a platform that does not take distributor commission, alongside the regular plan, sold through distributors who are paid a commission from the expense ratio.

Both plans invest in the same portfolio managed by the same fund manager. The only difference is the expense ratio, and therefore the NAV and returns.

How much can it matter?

Suppose the difference in expense ratio is 0.75% a year. On ₹10 lakh invested for 20 years at an assumed 11% gross return, the lower-cost plan ends with noticeably more — a gap that can run into several lakh rupees because the cost compounds. Try it in our compound interest calculator by running 10.25% and 11% side by side.

Who should choose which?

• Direct plans suit investors comfortable choosing and reviewing funds themselves, or those paying a SEBI-registered investment adviser a separate fee.
• Regular plans may suit investors who value a distributor's help with paperwork and discipline — as long as they understand the cost.

Where to buy direct plans

AMC websites, MF Central, and many brokers and platforms (several brokers we review, such as Zerodha, Groww and Upstox, list direct mutual funds at zero commission).