two mutual fund options exist for every scheme. direct and regular. the portfolio is identical. the fund manager is identical. the stocks or bonds held are identical.
the only difference is the expense ratio. and that difference compounds into a significant amount over time.
the difference: who gets paid
a regular fund includes a distributor commission. the mutual fund house pays this commission to the person or platform that sold you the fund. the commission comes from the expense ratio. you pay it. it reduces your returns.
a direct fund has no intermediary commission. you buy directly from the fund house or through a platform that offers direct plans. the expense ratio is lower. more of the market return stays in your account.
the numbers: what the difference actually costs
a regular plan for a large cap fund typically charges around 1.0% to 1.5% as the expense ratio. the direct plan for the same fund charges around 0.3% to 0.5%. the gap is roughly 0.5% to 1.0% per year.
that gap compounds.
consider a ₹10,000 monthly sip for 20 years. assume the fund delivers a 12% annual return before expenses.
| plan type | expense ratio | estimated corpus after 20 years |
| regular plan | 1.00% | ~₹85 lakh |
| direct plan | 0.30% | ~₹95 lakh |
the difference is approximately ₹10 lakh. the portfolio was identical. the fund manager was identical. only the expense ratio changed.
why distributors sell regular plans
regular plans pay commissions. direct plans do not.
distributors are not required to disclose the commission they earn. many investors are not aware that a regular plan exists alongside a direct plan for the same fund.
the distributor may present the regular plan as the only option. the investor assumes they are getting the best available product. that assumption is incorrect.
a practical test: checking your current investments
log into your mutual fund portfolio or statement. look for the scheme name. if it contains the word “regular” or does not contain the word “direct,” you are in a regular plan.
if you are in a regular plan, you can switch to the direct plan of the same fund. the process involves a redemption and a fresh purchase. switching has tax implications if done outside the capital gains exemption window.
the better approach is to stop new investments into the regular plan and start a new sip into the direct plan. existing holdings can stay or be switched based on your tax situation and holding period.
the caveat: direct plans are not for everyone
direct plans require the investor to research and select funds independently. there is no distributor to offer advice or emotional hand-holding during market corrections.
some investors benefit from the guidance and discipline a trusted financial advisor provides. in those cases, the higher expense ratio may be a reasonable cost for the service received.
the issue is not that regular plans exist. the issue is that most investors do not know they are paying for a service they are not receiving.
FAQs
1. is the fund manager different for direct and regular plans ?
no. the same fund manager manages both plans. the portfolio holdings are identical.
2. how do i check if my mutual fund is direct or regular ?
check your account statement or transaction history. the scheme name will usually mention “direct” or “regular.” if it is unclear, contact your fund house or platform.
3. can i convert my regular plan to direct plan ?
you cannot convert. you can redeem your regular plan units and buy the direct plan units. this is a taxable event if there is a capital gain.
4. does kuvera by cred offer regular plans ?
no. kuvera only offers direct plans. there is no distributor commission embedded in the expense ratio.
5. is the expense ratio the only difference between direct and regular plans?
yes. the portfolio, fund manager, and investment strategy are identical. the expense ratio is the only differentiator.
