Direct vs Regular Plans
Every mutual fund scheme in India comes in two plans: Direct and Regular. They invest in the exact same portfolio — the only difference is the expense ratio.
What's the Difference?
| Direct Plan | Regular Plan | |
|---|---|---|
| Commission | No commission | Distributor gets 0.5-1.5% p.a. |
| Expense Ratio | Lower (e.g., 0.5%) | Higher (e.g., 1.5%) |
| NAV | Higher (more money stays invested) | Lower (commission deducted) |
| Returns | Higher | Lower |
When you invest through a distributor (bank, app that sells Regular plans, financial advisor), they earn a trailing commission every year — typically 0.5% to 1.5% of your investment.
This commission is NOT paid by you separately — it's baked into the expense ratio, which reduces your NAV growth every day.
The Compounding Impact
The difference looks small (0.5-1.0% per year), but it compounds massively over time.
Example: ₹10,000/month SIP at 12% gross return:
| Period | Direct (0.5% ER) | Regular (1.5% ER) | You Lose |
|---|---|---|---|
| 10 years | ₹23.2L | ₹22.0L | ₹1.2L |
| 20 years | ₹99.9L | ₹89.2L | ₹10.7L |
| 30 years | ₹3.53 Cr | ₹2.82 Cr | ₹71.1L |
How to Switch from Regular to Direct
- Check if your current fund is Regular (look for "Regular" in the scheme name)
- Visit the AMC website directly or use a Direct-plan platform
- Submit a switch request (this is a sell + buy, may trigger tax)
- New purchases go into Direct plan automatically