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Key Differences Between Direct and Regular Plan Mutual Fund In 2025

Mutual Funds for Beginners • December 31, 2024 • 5 min read

Difference Between Direct And Regular Fund

Mutual funds have two types of investment options: Direct Plans and Regular Plans. Although both invest in the same portfolio of securities, the difference in how they are purchased and managed can affect the returns and overall cost to the investor.

This article explains the differences between Direct and Regular mutual funds, how to identify them, and when to choose each option.

Direct Mutual Funds Overview

Direct mutual funds are bought directly from an Asset Management Company (AMC), brokers, or distributors without involving financial advisory and have a lesser expense ratio.

Important Features:

Offer higher returns than regular funds due to the reduction in costs.
The investor has to research on his own and administer his investments.

Regular Mutual Funds Overview

Regular mutual funds are bought through intermediaries like financial advisors, brokers, or distributors. The intermediaries help the investor in fund selection and provide continued support.

Important Features:

Distributor commissions are added.
Suitable for investors who require professional advice or do not have time to monitor their investments.
Offer advisory services as a convenience but at a cost.

The Major Difference Between Direct & Regular Mutual Funds

Aspect	Direct Mutual Funds	Regular Mutual Funds
Purchase Mode	Either directly from AMC or through brokers and distributors, both online and offline.	Through brokers, distributors, or financial advisors.
Expense Ratio	Lower, as no commissions are paid to intermediaries.	Higher, as it includes distributor commissions.
Returns	Slightly higher due to reduced expense ratios.	Slightly lower due to additional costs.
Professional Guidance	Not included; investors must research and manage funds themselves.	Includes advisory and support services.
Suitability	Experienced and DIY investors are comfortable managing their portfolios.	Beginners or those preferring professional assistance.
NAV (Net Asset Value)	Higher due to reduced expenses.	Slightly lower due to additional costs.
Transparency	Full transparency on investments.	Intermediaries may influence fund selection.
Switching Costs	Free or minimal charges within the AMC’s offerings.	It may include exit loads or additional fees for switching.

How to Identify If a Mutual Fund Is Direct or Regular?

Identifying whether a mutual fund is Direct or Regular is easy:

Check the Fund Name:
Mutual fund schemes usually carry the words “Direct Plan” or “Regular Plan” in their names.

Example:

Direct: “ABC Equity Fund – Direct Plan.”
Regular: “ABC Equity Fund – Regular Plan.”

Check Expense Ratio:
The expense ratio of Direct Plans is much lower than that of Regular Plans. Check the fact sheet or KIM of the fund for details to learn more.
Check Your Investment Platform:
AMC’s online platforms or investment apps mention whether the chosen fund is Direct or Regular.
NAV Comparison:
Direct Plans usually have a slightly higher NAV compared to Regular Plans for the same fund because of lower costs.

Conclusion

Selecting between Direct and Regular mutual funds depends on your investment knowledge, time availability, and preference for professional guidance. Direct plans offer cost savings and better returns, making them ideal for experienced investors. Regular plans, on the other hand, are better suited for beginners or those who value expert advice.

Regardless of your choice, ensure that the selected fund aligns with your financial goals, risk appetite, and investment horizon.

FAQs

Q1. What Are the Disadvantages of Direct Mutual Funds?

While Direct Mutual Funds save costs, it involves certain disadvantages as follows:

It is the responsibility of investors to conduct their research and decision-making without any professional guidance.

It involves frequent tracking and rebalancing of the portfolio.

This type suits people who are aware of financial markets or how mutual funds operate.

Q2. Is It Good to Switch Mutual Funds from Regular to Direct?

Switching from Regular to Direct mutual funds can be beneficial in terms of cost reduction and better returns, but consider the following points:

Switching is treated as a redemption from the Regular Plan and reinvestment into the Direct Plan, which triggers capital gains taxes.

Some mutual funds charge an exit load if you redeem units within a specified time frame.

For long-term investors, the cost savings and higher returns from Direct Plans would outweigh the switching costs over time.

Q3. Can I invest in direct mutual fund plans and regular mutual fund plans at the same time?

Yes, you can invest in both at the same time. However, you need to keep in mind that the overall impact on your portfolio’s cost would also increase. This is because a regular plan has a higher expense ratio, and it could chip a bit from the returns that you earn on the investment in the long term. To conclude, this will finally come to preferences based on your investment goals.