Regular vs Direct Mutual Fund Plans: What the Commission Really Costs You
A regular plan and a direct plan of the same fund hold the exact same portfolio — but the regular plan quietly pays a distributor commission every year through a higher expense ratio. Because that fee is charged on your entire corpus annually, it compounds into a surprisingly large number. Enter your own SIP below to see the rupee cost.
TER = Total Expense Ratio. Defaults shown are typical for an actively-managed equity fund; your fund's actual regular and direct expense ratios are on its factsheet or on Value Research / the AMC website — plug in yours for a real figure.
The only thing that's different: the expense ratio
When you buy a mutual fund through a bank, an agent, or many investment apps, you're usually buying the regular plan. A slice of your money — the distributor's trail commission — is paid out every year, and it's bundled into the fund's Total Expense Ratio (TER). The direct plan, which SEBI made available on 1 January 2013, cuts out that commission: you buy straight from the fund house, so the TER is lower.
Everything else is identical — same securities, same fund manager, same returns before costs. The direct plan simply keeps more of the return in your pocket, so its NAV pulls ahead a little more every year.
| Regular plan | Direct plan | |
|---|---|---|
| Bought via | Distributor / agent / app | AMC website, MF Central, zero-commission apps |
| Distributor commission | Yes — paid yearly | None |
| Expense ratio (equity, typical) | Higher (~1.5–2.0%) | Lower (~0.5–1.0%) |
| Portfolio & fund manager | Exactly the same | |
| NAV over time | Lower | Higher |
Why a "small" 1% hurts so much
The expense ratio isn't a one-time fee — it's charged on your whole invested amount, every year. As your corpus grows, the rupee value of that 1% grows with it, and the money it skims off never gets the chance to compound. That's why a gap that sounds trivial turns into lakhs:
| ₹10,000/month SIP at 12% | After 15 yr | After 20 yr |
|---|---|---|
| Direct plan corpus | ₹48.1 lakh | ₹93.4 lakh |
| Regular plan corpus | ₹43.8 lakh | ₹81.8 lakh |
| Lost to commission | ₹4.3 lakh | ₹11.6 lakh |
Assumes a 1% expense-ratio gap (regular 1.5%, direct 0.5%) and a steady 12% gross return. Real returns and TERs vary; this is illustrative.
How to check which plan you're in
- Look at the fund's full name on your statement — it will say "Direct" or "Regular" (e.g. "…Flexi Cap Fund — Direct — Growth").
- Check your Consolidated Account Statement (CAS) from CAMS/KFintech — it lists the plan type for every holding.
- Compare the expense ratio on the factsheet or on Value Research against the direct variant — a visible gap means you're in regular.
Switching to direct — and the one catch
You can move existing units to the direct plan of the same fund and redirect future SIP instalments to direct. For new SIPs, starting direct from day one is simply cheaper with no downside. The catch applies to existing units you switch: a switch counts as a redemption, so capital-gains tax and any exit load can apply on the amount you move. For large, long-held holdings, do the tax math (or check with a tax adviser) before switching in one go; for fresh money, there's nothing to weigh.
When is a regular plan actually worth it?
The commission isn't automatically a rip-off — it pays for advice. If a genuine adviser stops you from panic-selling in a crash, picks suitable funds, and keeps your plan on track, that guidance can easily be worth more than the fee. The question is simply whether you're getting that value. If you'd have chosen the same fund yourself and you're comfortable managing it, the direct plan gives you an identical investment for less — and the table above is what the difference adds up to.
Frequently asked questions
What's the difference between regular and direct plans?
Same fund, same portfolio, same manager. Regular is bought via a distributor who earns a commission baked into a higher expense ratio; direct is bought straight from the AMC with no commission and a lower expense ratio, so its NAV is higher over time.
How much does a regular plan really cost?
It's the expense-ratio gap, charged yearly on your whole corpus, so it compounds. A 1% gap on a ₹10,000/month SIP at 12% costs about ₹4.3 lakh over 15 years and ₹11.6 lakh over 20 years versus the direct plan.
Can I switch from regular to direct?
Yes — switch existing units to the direct plan and point future SIPs to direct. A switch of existing units is treated as a redemption, so capital-gains tax and any exit load can apply; new SIPs starting direct have no such catch.
Are direct plan returns really higher?
Yes, mechanically — the portfolio is identical, but the direct plan deducts a smaller expense ratio, so a little more return stays invested and compounds each year. The longer the horizon, the wider the gap.