Direct or regular plan? The same fund at two different prices
Every mutual fund in India is sold in two versions. Same manager, same holdings, same everything, at two different fees. Many investors hold the expensive one without knowing there is a choice.
Last checked August 2026.
The short version
- A has no distributor commission built in, so its is lower.
- A is the same fund with an ongoing commission paid out of your money.
- The gap is often around 0.5% to 1% a year, every year.
- Over 20 years that gap can consume a meaningful share of your final amount.
- Check your statement. If the scheme name does not say Direct, it is regular.
What is actually different
Nothing about the investments. Both plans of a fund hold identical companies in identical proportions, managed by the same person, with the same strategy and the same risk.
The only difference is that a regular plan has a distribution commission built into its . That commission is paid every year out of the fund, to whoever sold it to you. A direct plan has no commission, because you bought it directly from the or through a platform that does not take one.
Because the fee is deducted from the fund itself, the direct plan has a different, higher NAV than the regular plan of the same scheme. Over time the two drift further apart. That gap is the commission, made visible.
What the gap actually costs
A difference of under one percentage point sounds small enough to ignore. It compounds, so it is not.
Take ₹10,000 invested every month for 20 years, and assume the fund earns 12% a year before fees. The direct plan charges 0.8%. The regular plan charges 1.7%. Everything else is identical.
| Direct plan | Regular plan | |
|---|---|---|
| Fee | 0.8% a year | 1.7% a year |
| Return after fee | about 11.2% | about 10.3% |
| Total invested | ₹24 lakh | ₹24 lakh |
| Roughly worth after 20 years | about ₹89 lakh | about ₹80 lakh |
The gap is roughly ₹9 lakh, on the same fund, for the same money, over the same period. These are illustrative figures using assumed returns, not a prediction. But the direction and the rough scale are what matters: the cost of a commission is not the commission, it is the commission plus everything it would have earned.
Note also that the fee applies to your whole balance every year, not just to new money. In year one, 0.9% of a small balance is negligible. In year twenty, 0.9% of a large balance is not.
How to check which one you hold
This takes about a minute and a lot of people discover something they did not expect.
- Look at the scheme name on your statement or app. A direct plan says Direct in the name, usually as something like Growth Direct Plan. If the word is absent, it is a regular plan.
- Compare the expense ratio shown against the same fund on the fund house own website. Both plans are listed.
- Check the NAV. The direct plan NAV of the same scheme is always higher.
If you are in a regular plan and want to switch
Switching from regular to direct within the same scheme is treated as a sale and a fresh purchase for tax purposes. So it can trigger capital gains tax, and it may attract an if you are still inside the load period. For you cannot switch until the three year on each instalment has passed.
A common approach is to stop new instalments into the regular plan, start them in the direct plan, and move the existing balance when the tax cost is small or when the units have become long term. That is a decision worth doing arithmetic on rather than rushing.
When paying for a regular plan is reasonable
This is not a lesson about advisers being bad. It is a lesson about knowing what you are paying for.
A commission is fair value if you are receiving real advice: someone who helped you set an asset allocation, who talks you out of selling in a crash, who handles the paperwork, who reviews things with you annually. Behaviour is worth more than fees, and an adviser who stops you panicking once in twenty years may have earned every rupee.
It is poor value if the person sold you a fund once, has not spoken to you since, and is collecting a percentage of a growing balance every year for that single introduction.
There is also a third route. A SEBI registered investment adviser charges you a stated fee directly and puts you in direct plans. You see exactly what advice costs, and the adviser has no reason to prefer one fund over another.
What to remember
- Direct and regular plans are the same fund. The regular plan has a distributor commission built into its fee.
- The gap is often 0.5% to 1% a year and applies to your entire balance, not just new money.
- Over 20 years that difference can cost a large share of your final amount.
- If the scheme name does not contain the word Direct, you hold the regular plan.
- Switching is treated as a sale and can trigger tax and exit load, so plan it rather than rushing it.
- Paying for advice is reasonable. Paying an annual percentage for a one-time introduction is not.