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Direct vs Regular Plans · Beginner · 4 min read

Direct vs Regular Mutual Funds: Understanding the Difference

The short answer

Direct and Regular are two plans of the same mutual fund scheme, holding the same portfolio and managed by the same fund manager. A Regular Plan's expense ratio includes distributor commission; a Direct Plan's does not, so a Direct Plan generally has a lower expense ratio and a correspondingly higher NAV over time. The choice is between a lower ongoing cost and the assistance a distributor provides — and in both cases the underlying investment risk is identical.

Written and reviewed by Amit Chadha, Mutual Fund Distributor at MutualFundAdvisor.in · AMFI ARN: 349461. Last reviewed .
This article is investor education only. It is not investment advice, a scheme recommendation or an assurance of returns.

This is one of the few mutual fund questions with a genuinely clear structural answer, and one where this site has an obvious interest to declare: MutualFundAdvisor.in is a Mutual Fund Distributor, so Regular Plans are what we are able to transact in.

That is exactly why the difference is worth setting out plainly rather than glossing over.

Same scheme, different plan

Direct and Regular plans belong to the same mutual fund scheme and generally share the same portfolio and fund manager. They have separate NAVs because their expense structures differ.

Nothing about the investment strategy, the securities held or the risk changes between the two. The difference is entirely in the cost structure and in how the investment reaches you.

Direct plans

Direct plans are purchased without a distributor. They generally have a lower expense ratio because distributor commission is not included.

The investor takes responsibility for scheme selection, transactions, documentation and ongoing review, or separately engages an appropriate professional for that work.

Regular plans

Regular plans are purchased through a Mutual Fund Distributor. The scheme's expenses include distributor commission, so the expense ratio is generally higher than the Direct Plan of the same scheme.

Depending on the service arrangement, a distributor may assist with education, paperwork, transactions and ongoing service. The scope of that service should be understood clearly before you begin, because it varies between distributors.

What the cost difference does over time

Because the difference is an annual percentage deducted inside NAV, it compounds. Over a long holding period the gap between the two NAVs of the same scheme widens, and the longer the period the more it matters.

Whether that cost is worth paying depends on what you get for it, and on what would actually happen without it. A lower expense ratio that comes with abandoning a plan during a downturn is not a saving.

Commission disclosure

Commission can vary by asset-management company, scheme and period. Ask for the applicable commission disclosure and understand how the distributor is compensated before investing.

A distributor earns from the schemes you hold through them, which is a fact worth knowing when you weigh any suggestion you receive — including on this site.

How to compare

Cost matters, but the decision also involves the help you need, your ability to evaluate schemes independently and whether you will maintain the plan without support.

  • Compare the same scheme and option when reviewing expense ratios and NAVs.
  • Understand exactly what service is included with a Regular Plan.
  • Do not assume that either plan type removes investment risk — the portfolio is the same.
  • Review scheme documents and suitability before proceeding.

Key takeaways

  • Both plans are the same scheme, the same portfolio and the same manager.
  • A Regular Plan's expense ratio includes distributor commission; a Direct Plan's does not.
  • The cost difference is deducted inside NAV and compounds over the holding period.
  • Neither plan changes the investment risk in any way.
  • Ask how a distributor is compensated, and what service the compensation covers.

Put this to work on your own numbers

For illustration only. Not investment advice. Mutual fund investments are subject to market risks; read all scheme related documents carefully. Returns assumed are hypothetical and not guaranteed.

Frequently asked questions

Sources and editorial review

Checked against the primary sources below on . Scheme terms, tax rules and regulatory requirements change — confirm the current position before acting on anything here.

What to read next

Next in the Direct vs Regular Plans track.

Direct vs Regular PlansExpense Ratio, Exit Load and Tax: The Costs to KnowThe three costs that sit between a scheme's headline return and what you actually keep — where each one is charged, and which of them you can influence.Choosing & Comparing Mutual FundsWhat Is the Expense Ratio of a Mutual Fund?What the Total Expense Ratio covers, how it is charged inside NAV rather than billed to you, how it compounds over a long holding period, and how to compare it properly.Mutual Fund BasicsWhat Is NAV in a Mutual Fund?What Net Asset Value means, how it is calculated and declared, why a low NAV does not make a fund cheap, and which NAV applies to your transaction.

Want to talk this through with a person?

Amit Chadha is a Mutual Fund Distributor (ARN: 349461). The first conversation is free and educational.

Risk Factors – Investments in Mutual Funds are subject to Market Risks. Read all scheme-related documents carefully before investing. Mutual Fund Schemes do not assure or guarantee any returns. Past performance of any Mutual Fund Scheme may or may not be sustained in the future. There is no guarantee that the investment objective of any suggested scheme will be achieved. All existing and prospective investors are advised to check and evaluate the exit loads and other cost structure (TER) applicable at the time of making an investment before finalizing any investment decision for Mutual Fund Schemes. We deal in Regular Plans only for Mutual Fund Schemes and earn a trailing commission on client investments. Disclosure of commission earnings is made to clients at the time of investment. The option of a Direct Plan for every Mutual Fund Scheme is available to investors and offers the advantage of a lower expense ratio. We are not entitled to earn any commission on Direct Plans; hence, we do not deal in Direct Plans.