Direct Plan — Mutual Fund Term Explained

Mutual fund units purchased directly from the AMC without a distributor. No commission paid, so expense ratio is 0.5-1% lower than regular plans.

Direct plans are offered by AMCs directly to investors, without involving any distributor. Since no commission is paid, the expense ratio is 0.5-1% lower than regular plans.

This cost difference compounds significantly. Over 20 years, a 1% lower expense ratio can mean 20-30% more corpus.

Related terms

• Regular Plan — Mutual fund units purchased through a distributor who earns a commission. Higher expense ratio than direct plans.
• Expense Ratio — The annual fee charged by a mutual fund as a % of AUM. Covers management fees, operational costs and commissions. Deducted daily from NAV.
• AMC (Asset Management Company) — The company that manages mutual fund schemes — like HDFC AMC, SBI Funds, Nippon India MF. SEBI-regulated.

Browse the full mutual fund glossary, or see this concept in action in the fund screener.