Where the two plans come from
SEBI directed that from 1 January 2013 every open-ended scheme must offer a separate direct plan, so that an investor could buy straight from the fund house without a distributor. Before that, every investment carried distribution cost whether the investor used a distributor or not.
What differs and what does not
| Direct plan | Regular plan | |
|---|---|---|
| Portfolio and fund manager | Same | Same |
| Expense ratio | Lower | Higher (includes distributor commission) |
| NAV | Higher over time | Lower over time |
| Where you buy | AMC website/app, some platforms | Through a distributor (ARN) |
| Service | You choose, track and rebalance yourself | Distributor handles paperwork, reviews and support |
| Code on the form | "DIRECT" | Distributor's ARN |
What the gap costs over 20 years
For equity funds the difference in expense ratio is often in the range of about half a point to a full point. Take a ₹10,000 SIP for 20 years where the direct plan returns 12% a year and the regular plan returns 11% (a one-point gap):
| Plan | Value after 20 years |
|---|---|
| Direct (12%) | ₹91.99 lakh |
| Regular (11%) | ₹81.56 lakh |
The difference is about ₹10.4 lakh. It is a real cost, and it is the price of whatever service comes with the regular plan.
When each makes sense
Direct suits you if you are comfortable choosing funds, filling forms, tracking taxes and, above all, staying calm in a fall without anyone to talk you out of selling.
Regular suits you if you want a person to explain, set up and review your investments and to stop you making an expensive mistake. A distributor adds value only if they actually do these things. The commission is paid from the fund's expense ratio, and no separate fee is added to your bill.
Whichever you choose, the biggest cost is behavioural: stopping a SIP in a market fall or switching funds on a hot tip will cost far more than a one-point fee. Ask any distributor how they will help you in a bad year and what they review each year.
How to check which plan you hold
Look at the scheme name on your statement: it will read "Direct Plan" or "Regular Plan", and a regular plan shows the distributor's ARN. You can usually switch a regular plan to direct; the switch is a redemption and a fresh purchase, so check the exit load and tax on the gain first.
Questions people ask
What is the difference between direct and regular mutual funds?
Same portfolio; the regular plan pays a distributor from the expense ratio, so its returns are slightly lower.
Are direct plans better?
They cost less. Whether they are better for you depends on whether you would make the same decisions without help.
Can I switch from regular to direct?
Yes, but it triggers a redemption, so exit load and capital gains tax may apply.
Do direct plans have a lower NAV?
The NAV of a direct plan grows slightly faster because it has lower costs, so its NAV is higher over time.
Is there a separate fee in a regular plan?
No. The commission is inside the expense ratio.
Keep going
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A Systematic Investment Plan (SIP) invests a fixed amount every month into a mutual fund.
Related terms
How we can help
Sources
- SEBI circular dated 22 October 2012 on direct plans (effective 1 January 2013)
- SEBI (Mutual Funds) Regulations, 2026 on expense disclosures
- calculations on the standard SIP method.
Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. This page is general education, not personal advice. Back to the full glossary