Don’t let your investment broker fool you!

Comparison of NAV movement between Direct Plans and Regular Plans
Direct Plans are better for you


Some brokers tell investors that Direct Plans are more Expensive than Regular Plans and it is not advisable to invest in them.  Please do not fall for this argument! Direct Plans are better for you. We will take you through an illustrative Direct Plans NAV calculation and compare it to a Regular Plan.

Say I invest Rs 100,000 in the Regular Plan and Rs 100,000 in the Direct Plan of a new scheme both at an NAV of Rs 100. So I get 1000 units of both the Regular Plan and the Direct Plan of the scheme in my investment account.


Breaking down a simple NAV calculation of Direct Plans vs Regular Plans

Let’s see what happens to each of these Rs 1,00,000 investments. For simplification, we assume all the expenses incurred by the fund are divided into two broad heads Fund Expenses and Commissions. Fund Expenses include items like fund manager salaries, office rent, electricity, marketing costs etc incurred by the Mutual Fund company to collect funds from investors and manage this money. Assume this be around 1% of AUM. Commissions includes anything that gets paid to the distributor for collecting money from investors such as you and I. Assume this be around 1.5% of AUM.

Now let’s look at the NAV calculation for my Regular Plan and Direct Plan investment.

Initial NAV 100 100
No of Units purchased 1,000 1,000
Initial Investment 100,000 100,000
Add: Returns on the investment 12,000 12,000
Less: Fund Expenses 1,000 1,000
Less: Commissions 1,500  
1,09,500 1,11,000
Divide by Number of Units 1,000 1,000
NAV at the end of 1 year 109.5 111.0 1.36%


As you can see, the NAV of the Direct Plan is higher because they do not have commission expenses. So don’t listen to these false arguments against Direct Plans.


Directs Plans investments get better with time

Let’s look at it in another way. Suppose I invest in the Regular and Direct plan at the end of year one. I’ll be buying the Regular Plan at 109.5 and the Direct Plan at 111.0. Let’s see what happens to both of my investments in 10 years.

Initial NAV 109.5 111.0
No of Units purchased 913.24 900.90
Initial Investment 100,000 100,000
Add: Returns on the investment 210,585 210,585
Less: Fund Expenses 29,440 29,440
Less: Commissions 38,640
2,42,505 281,545
Divide by Number of Units 913.24 900.90
NAV at the end of 10 year 265.54 312.07 +17%


So my investment in the Direct Plan of the scheme will be worth 17% more than the regular plan in just 10 years!

Please see the chart above to see the NAV difference between Direct Plans and Regular Plans over multiple years. The higher NAV over time is not a because Direct Plans are more expensive, it is because over time Direct Plans perform better.

Thus, Direct Plans are better for you.


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15 Responses

  • Bijay

    January 30, 2020 AT 08:34

    Hi, I need to merge to folio of same fund to one. Please help to do that.

    • Gaurav Rastogi

      February 3, 2020 AT 04:01

      You will have to write to the AMC to get this done. Please email and we will send you the procedure.

  • Varun Jyoti

    February 24, 2020 AT 07:07

    What if a broker is not just a broker, he is a financial advisor. he helps u in goal planning and manage the overall portfolio. In my case, i have a big portfolio allocated to MFs. So is it advisable for me to switch to direct funds?

    • Gaurav Rastogi

      February 25, 2020 AT 03:50

      If you want to pay for advice, pay specifically and transparently i.e pay them for advice and know the exact amount you pay them for it. Commissions embedded in regular plans are not a clean way to do so.

  • Yogi

    March 25, 2020 AT 03:32

    How can I convert my older and current MFs from regular to direct once I import my portfolio in Kuvera?

  • Vipul Humal

    July 28, 2020 AT 13:38

    I have to convert my Regular plane from NJ india into Kuvera Direct plane please helping me on it

  • Shrikant Kumbhar

    October 3, 2020 AT 16:26

    I have sip in ventura securities, I would like to transfer to kuchera from exists in ventura. Kindly help me.

  • Ankit Mittal

    October 19, 2020 AT 04:47

    Is there any capital gain tax while switching from regular to direct plan?

  • Nikhil Gupta

    December 20, 2020 AT 07:04

    How much commission kuvera charge if we subscribe direct plan through its app?

    • Gaurav Rastogi

      December 20, 2020 AT 14:31

      None, we don’t get any commission.