Every mutual fund scheme in India is offered in two versions: a regular plan and a direct plan. Both invest in exactly the same portfolio, hold the same stocks or bonds, and are managed by the same fund manager. The only difference is the distribution channel, and therefore the cost.
The cost difference
A regular plan pays a trailing commission to the distributor or agent who sold it to you. This commission is built into the fund's expense ratio, so the regular plan has a higher annual charge than the direct plan by roughly 0.5% to 1%.
| Direct plan | Regular plan | |
|---|---|---|
| Bought from | Fund house website, direct platform | Distributor, bank, agent |
| Commission to intermediary | None | 0.5-1% per year |
| Expense ratio | Lower | Higher |
| NAV | Slightly higher | Slightly lower |
| Portfolio | Identical | Identical |
Why the gap matters
On a Rs 10 lakh investment growing at 12% a year, a 0.75% expense-ratio difference compounds to roughly Rs 1.5 lakh over 10 years and Rs 5 lakh over 20 years. You receive less not because the fund performed worse, but because a larger slice of the return went to the distributor each year.
For a SIP of Rs 10,000 a month over 20 years, the direct plan can deliver Rs 8-12 lakh more than the regular plan at typical expense-ratio gaps. The identical portfolio makes this one of the few free improvements available in investing.
How to buy direct plans
- Fund house website: create an account on the AMC's own portal, complete KYC, and invest. Each fund house has its own site.
- Direct mutual fund platforms: aggregators like MF Central, Kuvera, Groww and others let you buy direct plans from multiple AMCs in one place. Ensure the platform is SEBI-registered and actually sells direct plans, not regular plans disguised with low commissions.
- MF Central: a joint initiative by CAMS and KFintech registrars, offering a single portal for direct transactions.
You need a PAN card, a bank account and completed KYC to start.
When a regular plan might still make sense
If you are genuinely unsure about which fund to choose, an asset-allocation decision, or how to handle taxation, a good distributor or advisor can add value that exceeds the 0.5-1% cost. The problem is not the regular plan itself but buying one without receiving any advice in return.
If you are already researching funds and making decisions yourself, paying the regular-plan commission serves no purpose. You are the advisor; you should not also be paying one.
Switching from regular to direct
You cannot convert existing regular plan units to direct. You need to: 1. Redeem units from the regular plan (this may trigger capital gains tax and exit load). 2. Invest the proceeds in the direct plan of the same scheme.
If exit load applies or the tax impact is significant, a gradual switch via STP or by directing all new investments to the direct plan while leaving existing regular units untouched is often more practical.
Use our SIP calculator to see how even a small expense-ratio difference compounds over decades.