The short answer
If you’re confident choosing funds, reviewing them and staying calm when markets fall, a direct plan is the better choice: it costs less. If you’d rather have someone do that with you, a regular plan can be worth it — but only if that person is actually doing the work.
That second part matters more than the plan type. Here’s why.
What’s the difference?
Every mutual fund scheme comes in two versions. Both hold exactly the same stocks or bonds, run by the same fund manager. The only difference is the cost.
- A direct plan is bought straight from the fund house, through its website, MF Central, or an app. No distributor is involved, so its annual cost (the expense ratio) is lower.
- A regular plan is bought through a distributor like us. Its expense ratio is a little higher, and that extra amount is paid to the distributor as commission, every year you stay invested.
For most equity funds, the difference is roughly 0.5% to 1% a year. For debt and liquid funds, it’s usually smaller.
| Direct plan | Regular plan | |
|---|---|---|
| Portfolio and fund manager | Same | Same |
| Annual cost | Lower | About 0.5–1% higher for equity funds |
| Who chooses and reviews your funds | You | Your distributor, with you |
| Where you buy it | Fund house website, MF Central, investment apps | Through a mutual fund distributor |
Does 1% really matter?
Over a long time, yes. Say you invest ₹20,000 a month for 20 years. If your fund earns 12% a year, you’d have about ₹2 crore. At 11% — the same fund with 1% more in costs — you’d have about ₹1.75 crore. That’s a difference of roughly ₹25 lakh.
So a regular plan isn’t free. It has to earn its cost.
These figures are for illustration only, assuming a steady return and a full 1% difference. Real returns vary year to year, and the actual cost difference for your fund may be smaller.
What the extra cost should pay for
In our experience, the biggest losses rarely come from fees. They come from decisions: stopping an SIP when markets fall, selling in a panic, buying whatever did best last year, or holding eight funds that all own the same stocks. A good distributor earns their commission by helping you avoid those mistakes. That means:
- Choosing funds that fit your goal and timeline, not the ones that pay them most.
- Reviewing your portfolio regularly and telling you when something needs to change, and when it doesn’t.
- Being there when markets fall, so a bad month doesn’t become a bad decision.
- Planning withdrawals when you need the money, in a tax-efficient way.
- Handling the paperwork: KYC, nominations, bank changes, address updates.
If your distributor does these things, the cost is usually worth it. If they sold you a fund five years ago and haven’t called since, you’re paying for a service you aren’t getting.
When a direct plan makes more sense
- You know what you want to invest in, for example a simple index fund, and you’re happy to review it yourself once a year.
- You’ve lived through a market crash before and didn’t sell.
- You enjoy managing your own money and have the time for it.
If that sounds like you, buy direct. We say this even though we only earn from regular plans, because it’s true.
Thinking of switching from regular to direct?
Switching isn’t just a click. Moving from a regular plan to a direct plan is treated as selling one and buying the other, so it can trigger capital gains tax and, for recent investments, an exit load. For equity funds, gains on units held for more than a year are taxed at 12.5% above ₹1.25 lakh a year; gains on units held for less than a year are taxed at 20%.
A simpler route is often to leave existing investments where they are and start any new SIPs in direct plans. Either way, work out the tax before you switch.
CurateMyMoney is an AMFI-registered mutual fund distributor (ARN-184811). Mutual fund investments are subject to market risks. Read all scheme-related documents carefully. Tax rules mentioned are as applicable at the time of writing and may change; please check the current rules or consult a tax professional before acting.
