Direct vs. Regular Mutual Funds: How to Save 1% in Commissions

What if you could earn lakhs, or even tens of lakhs, more on your mutual fund investments without taking any extra risk or changing your fund? It sounds too good to be true, but it's possible. The secret lies in understanding one simple choice you make every time you invest: choosing between a "Direct Plan" and a "Regular Plan."

Every single mutual fund scheme in India comes in these two versions. They are managed by the same fund manager and invest in the exact same stocks and bonds. Yet, the difference in your final return can be massive. Choosing the right plan is one of the easiest ways to maximize your wealth.

This guide will explain the simple difference between Direct and Regular plans, show you the shocking real-world impact of that difference, and help you make the right choice for your investments.

What Are Regular and Direct Mutual Fund Plans?

To understand the difference, let's use a simple analogy: booking a flight ticket.

Regular Plans: The "Commission" Route pośrednik

A Regular Plan is like buying your flight ticket through a travel agent. When you invest through an intermediary—like a local distributor, a bank relationship manager, or a traditional broker—you are buying a Regular Plan. For their service of advising you and handling the transaction, the mutual fund company (AMC) pays them a commission.

Here's the catch: This commission is not paid from the AMC's pocket. It's taken directly out of your investment value every year in the form of a higher annual fee, known as the **expense ratio**.

Direct Plans: The "Do-It-Yourself" Route ✈️

A Direct Plan is like booking your flight ticket directly from the airline's website. You are bypassing the agent and going straight to the source. When you invest in a Direct Plan, you are buying directly from the Asset Management Company (AMC) without any intermediary.

Since there's no commission to be paid to a distributor, the annual fee (expense ratio) is lower. It's the same fund, same manager, same stocks—just a lower cost for you.

[Image: A simple flowchart showing User -> Agent -> AMC (Regular Plan, Higher Fee) vs. User -> AMC (Direct Plan, Lower Fee)]

The Core Difference: Expense Ratio ✂️

The **expense ratio** is a small annual fee that all mutual funds charge to cover their operational costs, including the fund manager's salary and administrative expenses.

The only difference between a Direct and a Regular plan of the same fund is this fee. The expense ratio of a Direct Plan is always lower than its Regular Plan counterpart. This difference is the commission paid to the distributor and is typically between **0.5% to 1.5% per year**.

Does a 1% Difference Really Matter? The Shocking Math 📈

A 1% difference might sound tiny, but over the long term, its impact is enormous. Let's see this with an example, powered by the magic of compounding.

Two friends, Priya and Rohan, start a monthly SIP of ₹10,000 for their retirement.

• Priya is a DIY investor and chooses a Direct Plan.
• Rohan invests through his bank and ends up in a Regular Plan.

Let's assume the fund's underlying portfolio gives a return of 12% per year before fees.

Investor	Plan Type	Expense Ratio	Net Annual Return	Final Value (after 25 years)
Priya	Direct Plan	0.5%	11.5%	₹1.77 Crore
Rohan	Regular Plan	1.5%	10.5%	₹1.49 Crore

The result is staggering. After 25 years, Priya has **₹28 Lakhs more** than Rohan. This extra money didn't come from taking more risk; it came purely from avoiding the commission. Rohan effectively paid his agent ₹28 Lakhs for a service he could have easily done himself.

How to Invest in Direct Mutual Funds in 2025 ✅

In the past, investing in Direct Plans was difficult. Today, it's incredibly simple thanks to technology.

• Online Platforms: Apps and websites like **Groww, Zerodha Coin, Kuvera, and ETMONEY** are built for DIY investors. They primarily offer Direct Plans, making it the default and easiest choice.
• AMC Websites: You can also invest directly on the official websites of the AMCs (e.g., HDFC Mutual Fund, ICICI Prudential MF, etc.).

The process is a core part of any modern beginner's guide to investing.

When Might a Regular Plan Make Sense?

While Direct Plans are superior for most, a Regular Plan might be considered by someone who is completely new to investing, is not comfortable with technology, and requires significant hand-holding from a dedicated financial distributor for every step of the process. However, for most people in 2025 who are comfortable using a simple smartphone app, the value offered by the distributor often does not justify the massive long-term cost.

Conclusion: The Obvious Choice for the Informed Investor

The choice is clear. For the exact same fund, managed by the exact same expert, a Direct Plan will always give you higher returns than a Regular Plan because of its lower expense ratio. That 1% annual commission seems small, but over decades of investing, it compounds into a fortune.

If you are managing your own investments through an online platform, you should always choose the **Direct Plan**. It is the single easiest switch you can make to significantly boost your long-term wealth.

Have you checked if your mutual fund investments are in Direct or Regular plans? Let us know if this article helped you understand the difference!