Direct vs Regular mutual fund plans
Costs
Every mutual fund scheme comes in two flavours: Direct and Regular. The portfolio, fund manager and strategy are identical — the only difference is cost. It is the rare investing decision with a guaranteed right answer, yet a majority of Indian mutual fund money still sits in the costlier version.
The one difference: commission
A Regular plan pays an ongoing commission to the distributor/agent who sold it to you, baked into a higher expense ratio. A Direct plan is bought straight from the AMC (or a no-commission platform) with no middleman, so its expense ratio is lower — typically 0.5%–1% cheaper per year. Both plans hold the same stocks and publish separate NAVs; the Direct NAV creeps ahead a little more each day.
What that costs you — in rupees
Take a ₹10,000 monthly SIP for 20 years, with the fund earning 12% gross. In a Direct plan charging 0.8% you end with roughly ₹85 lakh; in the Regular version charging 1.8% you end nearer ₹75 lakh. That ₹10 lakh gap bought you nothing — same fund, same manager, same risk. The commission compounds against you silently for decades.
When Regular can make sense
A good adviser or distributor who keeps you invested through crashes, rebalances you, and stops you from panic-selling can be worth far more than 1% a year — behaviour, not fund selection, destroys most retail returns. The honest framing: pay for advice knowingly (via a Regular plan or a fee-only adviser), never accidentally. What you should avoid is paying a lifelong commission for a one-time sale with no ongoing service.
How to spot which plan you own
Look at the scheme name in your statement: it will contain "Direct" (e.g. "...Fund - Direct Plan - Growth") or "Regular". Bought through a bank relationship manager or a traditional agent? It's almost certainly Regular. Switching to Direct is possible but counts as a redemption plus fresh purchase — mind exit load and capital-gains tax before moving, and consider switching future SIPs first.
How Dhanik handles it
The screener and all Best Funds rankings default to Direct + Growth, so every comparison you see is the cost-efficient version. When comparing your own Regular holdings against these numbers, remember your plan's returns will run ~0.5–1% lower each year — the same fund will genuinely show two different CAGRs depending on the plan, and the gap you see is precisely the commission.
Quick checklist
- New investments: choose Direct unless you're knowingly paying for ongoing advice.
- Existing Regular holdings: compare the switch cost (exit load + tax on gains) against the ~1%/year saving — for long horizons the switch usually pays for itself within a couple of years.
- Always pair Direct with the Growth option (see Growth vs IDCW) for maximum compounding.
→ All funds in the MF Screener default to Direct plans.