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Regular or Direct Mutual Funds: What's the difference?

  • Writer: Manan Mehta
    Manan Mehta
  • Nov 20
  • 4 min read

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One simple decision—choosing direct over regular mutual funds—can add ₹15-50 lakh to your retirement corpus. Yet 70% of Indian investors unknowingly surrender these gains to intermediaries by investing in regular plans.


This guide explains exactly why direct plans are financially superior in every scenario, backed by calculations that reveal the true cost of regular plans.


Regular or Direct Mutual funds: What Makes Direct Plans Better

Both direct and regular plans invest in the exact same portfolio—same stocks, same fund manager, same strategy. The only difference is cost.​

Direct Plan:

  • Buy directly from AMC or platforms like Groww, Kuvera, Zerodha

  • No distributor commission

  • Expense ratio: 0.5-1.5%

  • Higher NAV (Net Asset Value)

Regular Plan:

  • Buy through distributors, agents, bank RMs

  • Includes distributor commission (0.5-1.5% annually)

  • Expense ratio: 1.5-2.5%

  • Lower NAV

The 0.5-1.5% difference seems trivial. Over 20-30 years, it's catastrophic.​


The Mathematics: How Much You Lose in Regular Plans


Example 1: Monthly SIP Over 20 Years


Investment: ₹10,000 monthly SIP Duration: 20 years Assumed return: 12% (pre-expense)

Direct Plan (1% expense ratio):

  • Effective return: 11%

  • Final corpus: ₹80,54,759

Regular Plan (2% expense ratio):

  • Effective return: 10%

  • Final corpus: ₹68,73,051

Loss: ₹11,81,708 (17.2% lower corpus)​

You paid ₹24 lakh (₹10,000 × 240 months) but lost ₹11.8 lakh to commissions—49% of your principal evaporated!


Example 2: Lump Sum Over 30 Years

Investment: ₹10,00,000 lump sumDuration: 30 yearsAssumed return: 12% (pre-expense)

Direct Plan (1% expense ratio):

  • Effective return: 11%

  • Final corpus: ₹2,28,92,987 (₹2.29 crore)

Regular Plan (2% expense ratio):

  • Effective return: 10%

  • Final corpus: ₹1,74,49,402 (₹1.74 crore)

Loss: ₹54,43,585 (31.2% lower)​

From the same ₹10 lakh investment, regular plan delivers ₹54 lakh less—over 5X your original investment destroyed by a seemingly "small" 1% annual fee.

Example 3: Real Fund Comparison

HDFC Equity Fund (as of 2024):​

Metric

Direct Plan

Regular Plan

Difference

Expense Ratio

1.05%

2.50%

1.45%

NAV (approx)

₹1,250

₹1,150

8.7% lower

10-year return

15.2%

13.5%

1.7% less annually

₹1,00,000 invested 10 years ago:

  • Direct: ₹4,18,000

  • Regular: ₹3,58,000

  • Loss: ₹60,000 (16.7%)


The Compounding Devastation


The expense ratio is deducted every single day from your investment.​

If you invest ₹5,000 in a fund with 2% expense ratio:

  • Daily deduction: 2% ÷ 365 = 0.0055%

  • Deducted amount: ₹5,000 × 0.0055% = ₹0.27 daily

  • Annual: ₹100

Seems harmless? Over 30 years with compounding, that daily ₹0.27 costs you ₹50,000+.​


Why NAV is Higher in Direct Plans

You'll notice direct plans have higher NAV than regular plans of the same fund.​

Example:

  • HDFC Top 100 Direct: NAV ₹850

  • HDFC Top 100 Regular: NAV ₹780

Why? Both started at ₹10 on launch day. Every day since:

  • Direct plan NAV grows by (Returns - 1% expense)

  • Regular plan NAV grows by (Returns - 2% expense)

The 1% daily difference compounds over years, creating 8-15% NAV gap.​

Important: Higher NAV doesn't mean direct is "expensive." You get proportionally fewer units but each unit is worth more. The total value is what matters—and direct always wins.​


If you want someone to assist you with your investments, feel free to contact us. Our team of experts will be happy to help. You can also email us at help@reymanwealth.com



Common Myths Debunked

Myth 1: "Regular plans give me expert advice worth paying for"

Reality: Most distributors earn ₹500-5,000 commission per client annually. They're incentivized to sell, not advise. Many recommend NFOs (New Fund Offers) paying 4-5% upfront commission instead of better-performing existing funds.​

Myth 2: "Distributors help with paperwork and KYC"

Reality: In 2025, KYC is 100% digital (15 minutes via Aadhaar e-KYC). Platforms like Groww, Kuvera do paperwork automatically. Zero distributor needed.​

Myth 3: "I'm a beginner, I need regular plans"

Reality: Beginners need education, not expensive products. Free resources (Varsity by Zerodha, MoneyControl, r/IndiaInvestments wiki, or our website) provide better education than commission-driven distributors.​

Start with index funds in direct plan—simpler than picking regular plan "advised" funds.

Myth 4: "1% difference is too small to matter"

Reality: Mathematics doesn't care about perception. 1% annually over 30 years = 25-35% corpus erosion. This is undeniable arithmetic.​

Myth 5: "Regular plans perform better because distributors choose better funds"

Reality: Direct vs regular are the SAME FUND with same holdings. Performance is identical minus expense ratio difference. Regular can never outperform its own direct version.​

When Regular Plans Made Sense (Hint: Never, But Here's the Argument)

Pre-2013, regular plans were the only option. Post-2013 when SEBI introduced direct plans, the case for regular plans evaporated.

The only theoretical justification:

  • You're completely financially illiterate

  • Learning is impossible for you

  • Distributor provides ongoing, valuable portfolio management



The Advisor Alternative: Best of Both Worlds

Want professional advice without regular plan costs? If you want someone to assist you with your investments, feel free to contact us. Our team of experts will be happy to help. You can also email us at help@reymanwealth.com




Direct Plans: SEBI's Gift to Investors

SEBI introduced direct plans in 2013 specifically to reduce costs and increase investor returns.​

Regulatory intent: Empower investors to bypass expensive distribution.

Success: Direct plan AUM grew from 5% (2015) to 25% (2025). Still, 75% of investors unknowingly pay unnecessary commissions.

Your responsibility: Choose direct. It's legally protected, SEBI-mandated, and financially optimal in 100% of scenarios.

Bottom Line: The Only Exceptions (There Are None)

Should you ever choose regular over direct?

Answer: No.

Even if you need advice, pay separately for advice and buy direct. Mixing advice with product (regular plans) creates conflict of interest and costs 10-50X more than fee-only advisors.


The math is undeniable:

  • Same fund, same portfolio, same manager

  • 0.5-1.5% lower cost annually

  • 15-50% higher corpus over 20-30 years

  • Zero downside


The choice is simple: Would you rather have ₹80 lakh or ₹68 lakh from the same ₹24 lakh investment? That's the direct vs regular decision. Make it wisely.

Direct plans aren't "better"—they're the baseline. Regular plans are expensive versions of the same product. Stop paying premium prices for identical goods.

Your financial future deserves direct plans. Start today.


If you want someone to assist you with your investments, feel free to contact us. Our team of experts will be happy to help. You can also email us at help@reymanwealth.com



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