Every mutual fund scheme in India comes in two versions: a Regular plan and a Direct plan. They hold the same portfolio and are managed by the same fund manager — so what is the difference? As a Mutual Fund Distributor, I believe you should understand this clearly, so here it is in plain words.
Key points
- Both plans invest in exactly the same portfolio.
- Regular plans include a distributor's commission in the expense ratio; Direct plans do not.
- So Direct plans have a lower expense ratio and a higher NAV over time.
- The choice depends on whether you want a distributor's services or prefer to manage everything yourself.
What is the difference?
| Regular plan | Direct plan | |
|---|---|---|
| How you invest | Through a Mutual Fund Distributor | Directly with the AMC or through a direct-plan platform |
| Portfolio & fund manager | Same | Same |
| Expense ratio | Higher (includes distributor commission) | Lower |
| NAV | Lower than Direct over time | Higher than Regular over time |
| Who helps you | Your distributor | You manage it yourself |
What is the expense ratio?
The Total Expense Ratio (TER) is the annual cost of running a scheme, expressed as a percentage of its assets. It covers fund management, administration and — in Regular plans — the distributor's commission. It is deducted from the scheme daily, so the NAV you see is already net of expenses.
SEBI sets maximum limits on TER, and AMCs publish the TER of every plan on their websites.
What does a distributor do for you?
When you invest through a Regular plan, the commission pays for services such as:
- Understanding your goals and explaining suitable fund categories and their risks
- KYC, account opening, nominations and paperwork
- Setting up, modifying, pausing and stopping SIPs
- Handling service requests like bank-detail changes and transmission
- Periodic reviews and statements, and support during market ups and downs
For many investors, the biggest value is behavioural — having someone to talk to before stopping a SIP in a falling market or chasing last year's top performer.
Which one should you choose?
A Direct plan may suit you if you are comfortable researching schemes, tracking your portfolio, handling paperwork and staying disciplined on your own.
A Regular plan may suit you if you value guidance, service and hand-holding, and prefer not to manage these things yourself.
Whichever you choose, the most important decisions are still the same: the right category, the right asset allocation, and staying invested for your goal's time horizon.
My commitment to transparency
I am an AMFI Registered Mutual Fund Distributor (ARN-354017), and I receive commission from AMCs on investments made through me in Regular plans. The commission paid on your investments is disclosed in your Consolidated Account Statement (CAS), and you're welcome to ask me about it at any time. Read the full disclosure here.
Have questions about how this works? Ask me.