Regular vs Direct Mutual Funds: Understand the complete difference before investing
While investing in mutual funds, a question often comes to mind – should choose Direct Fund or Regular Fund?
Both options are good, but there is a big difference in their cost, returns and convenience. Therefore, it is important to understand these before investing
What are Direct Mutual Funds?
Direct Mutual Funds are those schemes which you buy directly from the fund house (AMC).
These do not include any broker, agent or distributor.
Ways to invest in these funds:
Online from AMC website or mobile app
Offline by going to AMC office
Since there is no commission involved, the expense ratio of Direct Funds is low.
Lower expenses lead to better long-term returns.
What are Regular Mutual Funds?
Regular Mutual Funds are plans that you buy through a distributor, broker or financial advisor.
The distributor helps with your KYC, document submission and fund selection.
In return for this service, the fund house gives them commission, which impacts the expense ratio of the investor.
For this reason, the expense ratio of Regular Funds is higher than that of Direct Funds.
Direct vs Regular Mutual Funds: Key Differences
Point Direct Fund Regular Fund
Expense Ratio Less More
Agent/Help No Yes
Returns slightly less due to higher commission
NAV more or less
Managing the facility yourself Agent helps
1. Expense Ratio
There is no middleman in Direct Funds, hence expenses are less and net returns increase.
2. Intermediate
In Regular Funds, investment is done through an agent, whereas in Direct Funds, the investor invests himself.
3. Convenience
If you can manage everything yourself, then Direct is the right choice.
If you need guidance, Regular is more convenient.
4. Returns
Direct funds have better returns because of the lower expense ratio—this difference increases significantly in the long-term.
5.NAV
NAV of Regular Funds is always slightly lower than Direct.
It's very simple:
Name should contain Direct/Dir → Direct Fund
Regular/Reg in name → Regular Fund
Also, look at your CAS statement—if it mentions the ARN number or advisor's name, it is a Regular Plan.
Which Mutual Fund to choose – Direct or Regular?
When you have a good understanding of the market
When you can do your own research
When you want higher returns
When you are comfortable with technology (can use app/website)
When you are a new investor
When you need expert advice
When you don't want to manage your investments yourself
When you need a guide
Both are good options—it just depends on your needs and experience which plan is better for you. How to Invest in Direct or Regular Mutual Funds?
Direct Mutual Funds
Complete KYC on AMC website/app
choose fund
Start Investing through SIP or Lump Sum
There is no commission here, hence the expenses remain low.
Regular Mutual Funds
Contact a broker, distributor or financial advisor
They handle all your KYC, documents and fund selection
This path is easy for new investors.
FAQs: Direct vs Regular Mutual Funds
Q1. Do Direct Mutual Funds always give higher returns?
Yes, because direct plans do not charge commission and the expense ratio is low. This gives higher returns in the long run.
Q2. Can a new investor invest in Direct Funds?
You can, but if you don't have an understanding of funds, the Regular Plan would be better because the agent provides guidance.
Q3. Which plan is safer – Direct or Regular?
Both the plans are similar. The only difference is the cost and advice. There is no difference in risk.
Q4. Can I convert from Regular Fund to Direct Fund?
Yes, you can switch. But this is considered a separate transaction and tax and exit load may apply.
Q5. Why is NAV different between Direct and Regular?
Commission expense is added on regular fund, hence its NAV remains slightly lower.
Q6. Do both Direct and Regular have the same fund manager?
Yes, both the plans have the same fund manager. The portfolio is also similar—the only difference is the cost.
For those who are capable of conducting independent research and desire more profits, direct mutual funds are preferable.
For novice investors, regular mutual funds are preferable since they provide guidance and support
at every stage.
Prior to investing, be aware of your financial objectives and risk tolerance. If needed, consult a specialist.
There is no middleman in Direct Funds, hence expenses are less and net returns increase.
2. Intermediate
In Regular Funds, investment is done through an agent, whereas in Direct Funds, the investor invests himself.
3. Convenience
If you can manage everything yourself, then Direct is the right choice.
If you need guidance, Regular is more convenient.
4. Returns
Direct funds have better returns because of the lower expense ratio—this difference increases significantly in the long-term.
5.NAV
NAV of Regular Funds is always slightly lower than Direct.
How to identify Direct or Regular Fund?
It's very simple:
Name should contain Direct/Dir → Direct Fund
Regular/Reg in name → Regular Fund
Also, look at your CAS statement—if it mentions the ARN number or advisor's name, it is a Regular Plan.
Which Mutual Fund to choose – Direct or Regular?
✔ When is Direct Mutual Funds better?
When you have a good understanding of the market
When you can do your own research
When you want higher returns
When you are comfortable with technology (can use app/website)
✔ When is Regular Mutual Funds better?
When you are a new investor
When you need expert advice
When you don't want to manage your investments yourself
When you need a guide
Both are good options—it just depends on your needs and experience which plan is better for you. How to Invest in Direct or Regular Mutual Funds?
Direct Mutual Funds
Complete KYC on AMC website/app
choose fund
Start Investing through SIP or Lump Sum
There is no commission here, hence the expenses remain low.
Regular Mutual Funds
Contact a broker, distributor or financial advisor
They handle all your KYC, documents and fund selection
This path is easy for new investors.
FAQs: Direct vs Regular Mutual Funds
Q1. Do Direct Mutual Funds always give higher returns?
Yes, because direct plans do not charge commission and the expense ratio is low. This gives higher returns in the long run.
Q2. Can a new investor invest in Direct Funds?
You can, but if you don't have an understanding of funds, the Regular Plan would be better because the agent provides guidance.
Q3. Which plan is safer – Direct or Regular?
Both the plans are similar. The only difference is the cost and advice. There is no difference in risk.
Q4. Can I convert from Regular Fund to Direct Fund?
Yes, you can switch. But this is considered a separate transaction and tax and exit load may apply.
Q5. Why is NAV different between Direct and Regular?
Commission expense is added on regular fund, hence its NAV remains slightly lower.
Q6. Do both Direct and Regular have the same fund manager?
Yes, both the plans have the same fund manager. The portfolio is also similar—the only difference is the cost.
In conclusion
For those who are capable of conducting independent research and desire more profits, direct mutual funds are preferable.
For novice investors, regular mutual funds are preferable since they provide guidance and support
at every stage.
Prior to investing, be aware of your financial objectives and risk tolerance. If needed, consult a specialist.
