Direct vs Regular Mutual Fund Plans
The difference between direct and regular plans, why expense ratios matter, and how a small cost gap compounds over years.
Every mutual fund scheme is offered in two plans. A regular plan pays a commission to the distributor or agent who sold it. A direct plan is bought straight from the fund house or through a platform that charges no commission. Both hold exactly the same portfolio, managed by the same team.
The difference is the expense ratio
The commission is built into the regular plan's expense ratio, so a regular plan's ratio is higher, often by roughly 0.5% to 1% a year for equity funds. That money comes out of the fund's returns, so the direct plan's NAV grows faster.
What a small gap does over time
Suppose two plans earn the same 12% before costs, and the regular plan costs 0.8% more a year. On a ₹10,000 monthly SIP for 20 years, the direct plan ends up several lakh rupees ahead. Try it yourself: run the SIP calculator at 12% and again at 11.2%.
When regular can make sense
- You want a person to guide you and keep you from panic-selling, and you value that service.
- You are not comfortable choosing or monitoring funds yourself.
If you do pay for advice, a SEBI-registered investment adviser charging a transparent fee is an alternative to embedded commission.
Switching
Moving from regular to direct counts as a redemption and fresh purchase, which can trigger capital gains tax and exit load. Read the capital gains tax guide before switching an existing holding. For new investments, you can simply choose the direct plan.
Educational content only. Check the current expense ratio on the fund's factsheet.
Frequently asked questions
Do direct plans have lower returns risk?
No. The portfolio and risk are the same; only the cost differs.
Where can I buy direct plans?
From the fund house website or app, or from platforms and registrars that offer direct plans.
More guides
Calculators
Last reviewed: October 2026. General education, not financial advice.