Direct vs Regular Mutual Funds: The 1% That Costs You Lakhs
Regular plans charge 0.5–1% more than direct plans. Over 20 years, that difference can cost you ₹15–30 lakh. Here's how to switch.
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Every mutual fund scheme in India comes in two versions: Direct Plan and Regular Plan. They hold the same stocks, have the same fund manager, but differ in one critical way — the expense ratio. This “small” difference can cost you ₹15-30 lakh over your investment lifetime.
What's the Difference?
| Direct Plan | Regular Plan | |
|---|---|---|
| Sold by | You buy directly via Groww, Kuvera | Banks, agents, advisors |
| Commission | No commission | 0.5-1.5% annual to distributor |
| Expense Ratio | Lower (e.g., 0.35%) | Higher (e.g., 1.15%) |
| Returns | Higher | Lower |
The Real Cost of 1%
1% doesn't sound like much. Here's what it actually costs on a ₹15,000 monthly SIP:
Direct vs Regular — ₹15,000/month SIP over 30 years
| Direct (12%) | Regular (11%) | Difference | |
|---|---|---|---|
| After 20 years | ₹1.50 Cr | ₹1.27 Cr | ₹23 lakh |
| After 30 years | ₹5.27 Cr | ₹4.19 Cr | ₹1.08 crore |
How to Switch from Regular to Direct
- Stop new SIPs in the Regular plan
- Start a new SIP in the same fund's Direct plan via Groww, Kuvera, or Zerodha
- Existing holdings: Hold them (they keep earning returns) or redeem and reinvest in Direct. Note: redeeming triggers capital gains tax.
Where to Buy Direct Plans
- Kuvera — 100% direct, completely free
- Groww — direct plans default, very user-friendly
- Zerodha Coin — direct plans only
- MFCentral — government-backed platform to view and switch all holdings
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This article is for informational and educational purposes only and does not constitute financial, tax, or investment advice. Consult a qualified professional before making financial decisions.