Direct vs Regular Mutual Fund — The 1.5% Difference Compounds to ₹50 Lakh
Last verified: April 2026, against AMFI fund disclosures, SEBI’s commission disclosure norms, and current expense ratios.
Two versions of every mutual fund scheme exist: Direct (no distributor commission) and Regular (commission baked in). Direct plans charge 0.5-1.5% lower expense ratio. Over a 25-year SIP, this seemingly tiny difference compounds to ₹40-60 lakh on a ₹10,000 monthly investment.
The cost gap — flexi-cap funds
| Fund | Direct | Regular | Diff |
|---|---|---|---|
| Parag Parikh Flexi Cap | 0.61% | 1.34% | 0.73% |
| HDFC Flexi Cap | 0.78% | 1.42% | 0.64% |
| Mirae Asset Large & Midcap | 0.55% | 1.62% | 1.07% |
| Axis ELSS Tax Saver | 0.71% | 1.65% | 0.94% |
| UTI Nifty 50 Index Fund | 0.20% | 0.55% | 0.35% |
The compounding math
₹10,000 monthly SIP for 25 years at 12% gross CAGR. With 0.7% expense difference: Direct ~₹1.90 Cr, Regular ~₹1.66 Cr — a wealth gap of ₹24L. With 1.5% difference: gap widens to ₹54L.
Why distributors don’t tell you
Trail commission of 1-1.5% per year accrues to distributors as long as you hold. SEBI banned upfront commissions in 2018 — but trail commissions continue. Banks, IFAs, and wealth managers earn through Regular plans.
How to invest in Direct plans
AMC website: Open account with each AMC, complete KYC, link bank, set up SIP. Tedious for multi-AMC portfolios.
Direct platforms: Coin (Zerodha), Groww, Kuvera, INDmoney, Paytm Money, ETMoney aggregate Direct plans. Most are free.
RIA-managed: Hire fee-only RIA (~₹15-50K annual) for portfolios above ₹50L.
Switching from Regular to Direct
- Audit your portfolio. Identify Regular plans (“Regular – Growth” suffix).
- Stop SIPs in Regular.
- Start fresh SIPs in Direct via Coin/Groww/Kuvera.
- Decide whether to redeem old units (LTCG implications).
- Use ₹1.25L LTCG exemption annually for gradual conversion.
FAQs
Are Direct plans on platforms safe?
Yes — units held in your name with the AMC, not the platform.
Can I move existing Regular units to Direct in same scheme?
“Switch” is treated as redemption + fresh purchase = capital gains event. Use STP or fresh SIP routes.
Index fund expense ratios?
Direct: 0.10-0.20%. Regular: 0.50-0.85%.
Linked deep-dives
Sources
- AMFI factsheets
- SEBI MF regulations on TER
Last verified: April 2026.
