Direct vs Regular Mutual Funds: Understanding the Difference
Learn how plan types differ in distribution, expenses and investor support.
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.
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.
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 should be understood clearly.
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.
How to compare
Cost matters, but the decision also involves the help you need, your ability to evaluate schemes and whether you will maintain the plan independently.
- Compare the same scheme and option when reviewing expense ratios and NAVs.
- Understand what service is included with a regular plan.
- Do not assume that either plan type removes investment risk.
- Review scheme documents and suitability before proceeding.