Direct vs Regular Mutual Fund Plans: An Honest Explanation
Published 2026-10-16 · Aadarna Stock Broking Pvt. Ltd.
Key takeaways
- Direct and regular plans of a scheme invest in exactly the same portfolio.
- A regular plan has a higher expense ratio because it includes commission paid to the distributor.
- That cost difference reduces the regular plan's value over time compared with the direct plan.
- Whether a regular plan is worth it depends on whether you value the distributor's service and help.
Every mutual fund scheme comes in two versions: a direct plan and a regular plan. You will often hear that direct plans are cheaper, and that is true. As an AMFI-registered Mutual Fund Distributor, Aadarna earns commission on regular plans, so we want to explain the difference honestly and let you decide.
Same scheme, two plans
The direct and regular plans of a scheme are managed by the same fund manager and invest in the same portfolio. The only differences are the cost and the way you invest.
Each plan has its own NAV. Because the regular plan has higher expenses, its NAV grows a little more slowly over time than the direct plan's.
Where the cost difference comes from
Every scheme charges an annual expense ratio to cover management and other costs. In a regular plan, the expense ratio also includes the commission that the fund house pays to the distributor who helped you invest. In a direct plan, there is no distributor commission, so the expense ratio is lower.
The expense ratios of both plans are published on the fund house's website, in the factsheet and on the AMFI website. Compare them for any scheme you are considering.
How much does the difference matter?
The difference in expense ratio is usually a fraction of a percent each year, but it applies every year to your whole investment. Over long periods, that adds up.
For example, say you invest the same amount in the direct and regular plans of a scheme and both earn the same before costs. After many years, the direct plan's value will be noticeably higher, simply because less was deducted each year.
What a distributor provides
In return for commission, a distributor can help you with:
- Opening and completing KYC, and keeping your details, bank account and nominees updated.
- Paperwork for purchases, SIPs, switches and redemptions.
- Tracking your folios and resolving service issues with fund houses.
- Explaining scheme documents, riskometers and costs so you understand what you hold.
- Reminders and support during market falls, when many investors make rushed decisions.
A distributor is not an investment adviser. Fee-based advice is not part of a distributor's role, and is given by SEBI-registered investment advisers, who usually work with direct plans and charge you a separate fee.
Questions to ask any distributor
- What is your ARN, and can I verify it on the AMFI website?
- What commission do you earn on the schemes you are helping me with?
- What service will you provide after I invest, and how do I reach you?
- Will every transaction go directly to the fund house in my own name? (It must.)
A good distributor will answer these openly. If anyone is reluctant to tell you how they are paid, take that as a warning sign.
How to decide
- If you are comfortable choosing schemes, completing transactions and tracking everything yourself, a direct plan costs less.
- If you value help with paperwork, service and staying on track, a regular plan through a distributor may be worth the higher cost to you.
- Either way, compare the expense ratios and make an informed choice.
You can also switch between plans of the same scheme. A switch is treated as a redemption and a fresh purchase, so exit load and tax may apply. Check before switching.
Frequently asked questions
Do direct and regular plans hold different investments?
No. Both plans of a scheme invest in the same portfolio. Only the expense ratio, and therefore the NAV, differ.
How do I know how much commission my distributor earns?
Distributors are required to disclose commissions, and your account statement shows details of commission paid by the fund house for your investments. You can also ask your distributor directly.
Can I move from a regular plan to a direct plan?
Yes, by switching or redeeming and reinvesting. It counts as a redemption, so exit load and tax may apply. Check the scheme documents first.