By BrandsShouts When investing in mutual funds, one of the most important decisions you must make is choosing between Direct Plans and Regular Plans. Both options invest in the same portfolio, have the same fund manager, and follow the same investment strategy. Yet, the returns differ—sometimes significantly. Many new investors do not understand this difference and often choose a plan without proper knowledge. This article explains Direct vs Regular mutual funds, how they work, the difference in returns, who should choose which plan, and finally, which one is better for you.
What Are Direct Mutual Fund Plans?
Direct plans were introduced in 2013 by SEBI to make mutual fund investing more transparent and cost-effective.
In a Direct Plan, you invest directly through:
- AMC (fund house) website
- AMC mobile app
- Offline AMC office
- RTA platforms like CAMS or KFinTech
There is no middleman, which means no commission is paid to any distributor or advisor.
Key Features of Direct Plans
- Lower expense ratio
- Higher long-term returns
- Full control over investment decisions
- Suitable for knowledgeable or self-directed investors
What Are Regular Mutual Fund Plans?
Regular plans are the traditional way of investing. Here, you invest through:
- Mutual fund distributors
- Banks
- Brokers
- Online platforms
- Independent financial advisors
Since a middleman is involved, they receive a commission from the fund house. This commission comes from the investor’s money through a higher expense ratio.
Key Features of Regular Plans
- Higher expense ratio
- Lower returns than direct plans
- Continuous guidance from an advisor
- Suitable for beginners or investors needing hand-holding
Difference Between Direct and Regular Plans
Even though both plans invest in the same fund, the expense structure makes the results different.
1. Expense Ratio
The biggest difference is the expense ratio.
- Direct Plan: Lower
- Regular Plan: Higher (includes distributor commission)
Lower cost automatically improves long-term returns.
2. NAV (Net Asset Value)
Direct plans have a higher NAV because they deduct fewer expenses.
3. Returns
Because of lower charges, direct plans offer 0.5% to 1.5% higher annual returns compared to regular plans. Over 10–15 years, this makes a huge difference.
4. Advisory Support
- Direct plan: No guidance
- Regular plan: Advisor support included
5. Convenience
Many investors prefer regular plans for personalized recommendations and portfolio monitoring.
Example: How Much Difference Does It Make?
Let’s assume you invest ₹10 lakh for 15 years in both plans.
Direct Plan
- Returns: 12%
- Final amount: Approx. ₹54 lakh
Regular Plan
- Returns: 11% (1% less due to higher expenses)
- Final amount: Approx. ₹46 lakh
Difference: ₹8 lakh
This shows how small expense differences grow big due to compounding.
Advantages of Direct Plans
1. Higher Returns
Even a 1% difference per year can create huge wealth in the long run.
2. Lower Costs
No distributor commission means more of your money stays invested.
3. Transparency
You deal directly with the fund house—no hidden fees.
4. Better for Experienced Investors
If you can analyse funds yourself, direct plans are the most efficient option.
Advantages of Regular Plans
1. Expert Guidance
An advisor helps you:
- Choose the right funds
- Set goals
- Manage risk
- Rebalance the portfolio
- Avoid emotional decisions during market volatility
2. Convenience
You don’t have to track markets, compare funds, or rebalance manually.
3. Ideal for Beginners
New investors may not understand fund categories, risk levels, or asset allocation. Regular plans solve this problem.
Disadvantages of Direct Plans
- You must research, compare, and select funds on your own.
- No advisor is available to give personalised guidance.
- Mistakes in fund selection can reduce returns more than the savings in expense ratio.
- Harder to manage for those with multiple funds across categories.
Disadvantages of Regular Plans
- Higher cost due to commissions.
- Lower returns compared to direct plans.
- Some advisors focus on selling funds instead of investor benefit.
- The difference in long-term returns can be large.
Direct vs Regular: Which One Is Better?
There is no single answer for everyone. The choice depends on your knowledge, experience, and comfort level.
Choose Direct Plans If:
- You understand mutual funds well
- You can research funds on your own
- You have clear financial goals
- You are comfortable monitoring your portfolio
- You want to maximize long-term returns
Direct plans are ideal for DIY investors, financially knowledgeable individuals, and young investors who prefer learning and managing their own investments.
Choose Regular Plans If:
- You are a beginner
- You don’t have time or interest in analysing funds
- You want regular guidance and personalised advice
- You tend to panic during market falls
- You need help with long-term financial planning
Regular plans are ideal for investors who value guidance more than cost savings.
Final Verdict
Both direct and regular mutual fund plans have their benefits. Direct plans offer higher returns, but regular plans offer expert support. Instead of thinking which one is universally better, think about which one suits your needs.
The most important thing is to invest consistently, choose good funds, and stay disciplined. Whether direct or regular, mutual funds remain one of the best ways for Indians to build long-term wealth.