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Direct vs regular mutual funds differ primarily in cost structures and mode of investment. Direct plans offer lower expenditure ratios because they eliminate distributor charges, whereas regular plans incorporate intermediate services, which increase costs.
Both plans invest in the same underlying portfolio and have equal risk profiles. The decision between them is based on whether an investor desires reduced expenses or needs support from a distributor or advisor.
Key Takeaways
● Direct plans usually have a lower expense ratio because they do not include distributor commissions.
● Regular plans are routed through distributors or advisors and, therefore, include distribution-related costs.
● A direct plan’s NAV is typically higher than the regular plan’s NAV of the same scheme because of the lower TER, not because of better portfolio performance.
● Scheme names usually mention “Direct” or “Regular,” and the CAS “Advisor” field may show ARN details for regular plans and direct for direct plans.
Understand the Expense Ratio in a Mutual Fund
The expense ratio is the annual fee charged by a mutual fund to manage and operate the scheme. It covers fund management, administration, and other operating expenses.
Under the SEBI (Mutual Funds) Regulations, 2026, the expense structure is split into a Base Expense Ratio (BER), which covers the AMC's fund management and operational costs, plus separately disclosed brokerage, transaction costs, and statutory levies such as GST, STT, and stamp duty. Together, these form the Total Expense Ratio (TER)
What are Direct Mutual Funds?
Direct mutual fund plans allow investors to invest directly with the AMC, through its website, app, branch, or other official channels, without routing the transaction through a distributor.
Under the SEBI (Mutual Funds) Regulations, 2026 (effective April 1, 2026), these plans eliminate distributor commissions. As a result, the BER and overall TER are lower than those of the corresponding regular plans, often by about 0.5–1% point. This also depends on the fund category, AUM size, and the distributor's individual commission structure.
What are Regular Mutual Funds?
Regular mutual fund plans are purchased through SEBI-registered distributors, advisers, or platforms with a valid ARN (AMFI Registration Number), which include services such as fund selection, portfolio guidance, and transaction assistance.
The distributor commission, capped by SEBI's TER slabs, is included in the plan's expenditure structure, resulting in a larger TER than direct plans (for example, equity funds may display 1.5-2% vs. 1-1.5% for direct).
Differences Between Direct and Regular Plans
| Parameter | Direct Plan | Regular Plan |
| Third-Party Distributor | Not involved in the transaction | Involved in the transaction |
| Expense Ratio | Lower, as distributor commissions are excluded | Higher, as distribution costs are included |
| Net Asset Value (NAV) | Typically higher than the regular plan of the same scheme because of lower TER | Typically lower than the direct plan of the same scheme because of higher TER |
| Returns | Potentially higher over time due to lower expenses | Potentially lower over time due to higher expenses |
| Guidance and research | Investor handles selection and monitoring | Distributor/advisor may assist with selection and servicing |
| Investment Process | Investors apply directly with the AMC or approved direct channel | Investors apply through agents/distributors |
From the above table, we can make some clear differences between direct and regular plans for mutual funds:
- The NAV is higher for a direct mutual fund due to a lower expense ratio, not due to any difference in underlying performance. That means, for the same returns obtained from a fund, a lesser amount is charged under the expense ratio under a direct plan.
- In the case of a regular plan, you will be offered the services of an advisor who will assist you in multiple mutual fund investments in various ways. Their services will include investment advisory and facilitation of investments by assistance in various procedures and documentation. In the case of a direct plan, there will be no such assistance.
Which is Better - Direct Vs Regular Mutual Fund?
Whether a direct mutual fund is better for you or a regular one depends on the following factors:
● Your capability as an investor: If, as an investor, you are capable of understanding all the data related to the mutual fund and can take an informed decision, you may not need the help of an advisor. Therefore, a direct plan can be better for you. However, if you are not capable or confident of making investment decisions without professional help, it is best that you go for a regular plan.
●Technological and other resources: Some investors benefit from professional advice through SEBI-registered Investment Advisers (RIAs), who provide research-backed fund selection guidance. Note, however, that RIAs typically route clients through direct plans while charging a separate advisory fee — not through regular plans. Regular plan distributors (ARN holders) primarily assist with transaction facilitation and may not provide comprehensive research or portfolio analysis.
Advantages of a Regular Plan Over Direct Plan in Mutual Funds
You may be new to the world of investing, or you may be short of time and resources to make informed investment decisions. In both cases, having a regular plan may be a small price to pay for choosing the right funds to invest in with less effort.
The following are some advantages of investing in a regular plan mutual fund over a direct one:
●Ease of operation: A regular mutual fund plan may be more expensive. Still, it reduces a lot of the burden for you. This is because, without a regular plan, you will have to understand your own risk profile, the risk and return potential of multiple funds, and then match the right set of funds to your goals and risk profile. However, a professional can help you do this more efficiently under a regular plan.
●Monitoring fund performance and markets: You may not have adequate time every day to monitor the performance of your portfolio. You may also not be adequately aware of the market trends. Thus, you may be under-prepared to rebalance your portfolio as per the market trends as and when required.
● Other valuable services: An intermediary can offer several additional services, such as keeping accounts of your investments, helping out in tax filing and submitting KYC documents, facilitating redemptions, etc. These services are typically not provided under direct plans, as there is no intermediary involved.
How To Recognise if a Mutual Fund Is Regular or Direct?
Identifying direct or regular mutual funds is straightforward, as they are labelled with the words “Direct” or “Regular” in the fund’s name. This nomenclature indicates that the fund is available for either a direct or a regular mode of investment.
You can also check your Consolidated Account Statement (CAS) to identify whether a holding is in a regular or direct plan. In the CAS, look at the ‘Advisor’ field. If an ARN (AMFI Registration Number) of a distributor or adviser is listed, the plan is a regular plan. If the field shows “Direct” or no ARN, the holding is typically under a direct plan.
How to Invest in Direct or Regular Mutual Funds?
Here’s how to invest in direct mutual funds:
●Complete KYC through an SEBI‑recognised e‑KYC method (such as Aadhaar‑based e‑KYC or PAN‑linked instant KYC).
● You can do it either via MF Central, the AMC’s website or app, or any other authorised KYC gateway.
● Select "Direct" plans explicitly.
●Choose scheme, investment amount/mode (lump sum or SIP), and payment via net banking/UPI.
● Confirm ARN absence in transaction details.
● Investments reflect same-day NAV if before cut-off (typically 3 PM).
● Monitor via CAS or app.
Here’s how to invest in regular mutual funds:
● Ensure KYC compliance.
●Approach a SEBI-registered distributor (ARN holder) via their platform, app, or branch.
● They assist with scheme selection, fill forms, and submit to AMC.
● Pay via linked bank; ARN appears in folio/CAS.
● Cut-off rules same as direct.
● They are ideal for guided investing; the distributor provides ongoing support.
Conclusion
As key point of consideration when comparing direct vs regular mutual fund is determining how comfortable you are managing your investments. Direct plans may help reduce costs over time, while regular plans offer guidance and support through intermediaries.
Both options invest in the same underlying portfolio, so the difference mainly lies in cost and convenience. It is important to assess your knowledge, time availability, and need for assistance before deciding which approach suits you better.
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