Direct vs Regular Mutual Fund: Which is better in 2025?

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Last Updated on June 20, 2025 9:01:25 PM by Vivek Makwana

Are you planning to invest in a Mutual Fund but confused between Direct vs Regular Mutual Fund plans? 🤔 Don’t worry, you’re not alone! In this guide, we’ll break it down in a fun, easy, and emoji-packed way 😄 so you can make the best decision for your financial future. 📈

When investing in mutual funds, you have two primary options: Direct Plans and Regular Plans. Understanding the differences between these can help you make informed decisions that align with your financial goals.

🧠 What is a Mutual Fund?

A Mutual fund is a pool of money collected from investors to invest in stocks, bonds, or other assets. 🏦 It’s managed by professional fund managers who aim to grow your wealth. 📊

There are two main ways to Invest:

• 🟩 Direct Mutual Fund
• 🟦 Regular Mutual Fund

🔍 Direct Mutual Fund vs Regular Mutual Fund: What’s the Difference?

Feature ⚙️	💼 Direct Mutual Fund	🤝 Regular Mutual Fund
Expense Ratio 💸	Lower (No commission)	Higher (Includes distributor fees)
Returns 📈	Higher over long term	Slightly lower
NAV 💵	Higher	Lower
Guidance 🧑‍🏫	Self-managed	Advisor support
Best For ✅	Do-It-Yourself Investors	Beginners or those needing help

📊 Example of Estimated Growth:

Let’s say you invest Rs1,00,000 for 10 years:

• 🟩 Direct Fund earns 12%: Rs3,10,000+
• 🟦 Regular Fund earns 10.5%: Rs2,71,000+

💡 That’s almost Rs39,000 more with a Direct Mutual Fund! 💥

💰 Expense Ratio: The Cost Factor

The expense ratio represents the annual fees charged by the fund house, expressed as a percentage of the fund’s average assets under management (AUM).

• Regular Plans: Higher expense ratios as they include commissions paid to intermediaries.
• Direct Plans: Lower expense ratios due to the absence of intermediary commissions.
• Over time, these differences can significantly impact your investment returns.

The expense ratio impacts your returns significantly. Learn more about Direct vs Regular Mutual Fund plans on the official AMFI page.

📈 Returns: Maximizing Your Gains

Given the lower expense ratios, Direct Plans typically offer higher returns compared to their Regular counterparts. The underlying investments remain the same; however, the reduced costs in Direct Plans mean more of your money is working for you

💹 Net Asset Value (NAV): Understanding the Value

The Net Asset Value (NAV) is the per-unit value of the mutual fund. Direct Plans usually have a higher NAV than Regular Plans because they don’t deduct intermediary commissions. This doesn’t affect the performance but reflects the cost structure differences.

🛡️ Avoiding Potential Conflicts

Investing through intermediaries in Regular Plans might expose you to potential conflicts of interest, as advisors may recommend funds that offer higher commissions rather than those best suited to your needs. Direct Plans eliminate this risk, giving you full control over your investment choices.

🧠 Taking Control of Your Investments

Opting for Direct Plans means you’re responsible for researching and selecting funds. While this requires more effort, it empowers you to make decisions aligned with your financial objectives. Platforms like Groww provide tools and resources to assist you in this process.

🤔 Which Mutual Fund is Better for You?

✅ Choose Direct Mutual Fund if:

• You are financially savvy 🧠
• You want to save on commissions 💰
• You prefer to manage your own investments 📱

✅ Choose Regular Mutual Fund if:

• You are new to investing 🚀
• You need expert guidance 🧑‍💼
• You prefer convenience over cost 🛋️

📌 How to Switch from Regular to Direct Mutual Fund Plan

If you’re currently invested in a regular plan and wish to switch to a direct plan, the process is simple but comes with certain conditions:

1. Login to Your AMC or Platform Account: Most fund houses and platforms like Groww, Kuvera, or Zerodha Coin allow switching options online.
2. Choose the Fund and Select ‘Switch’ Option: Pick the exact scheme name but with the ‘Direct’ tag.
3. Review Exit Load and Tax Impact: If your investment is under 1 year, short-term capital gains tax (STCG) and exit loads may apply.
4. Confirm Transaction: Once confirmed, the amount is redeemed and re-invested in the direct variant.

⚠️ Note: Switching counts as a redemption. It may impact your tax planning and returns, so consult a financial advisor if unsure.

💡 When Is It Better to Stay in a Regular Plan?

While direct plans offer higher returns due to lower costs, regular plans still make sense in some cases:

• First-Time Investors: Need hand-holding and guidance on asset allocation.
• Complex Financial Goals: If you have multiple life goals like child education, retirement, and tax-saving, a financial advisor helps create a structured plan.
• Elderly Investors: Less tech-savvy investors may prefer human interaction for convenience and clarity.
• Lack of Time or Interest: Some people simply don’t want to manage portfolios actively.

In such cases, paying a slightly higher expense ratio is worth the peace of mind and professional input.

🧠 Bonus Tip: Use a Hybrid Approach

You don’t have to stick to one plan forever. Many investors use direct plans for simple SIPs in index funds and choose regular plans for active, goal-based portfolios managed by a trusted advisor.

This hybrid strategy helps you:

• Maximize returns on passive investments
• Get professional guidance for complex needs

📝 Final Thoughts

Both Direct and Regular Mutual Funds have their merits. If you’re confident in managing your investments and wish to minimize costs, Direct Plans are advantageous. However, if you prefer professional guidance, Regular Plans might be more suitable.

Remember, the key is to choose the option that aligns with your comfort level and financial goals.

Start small, stay consistent, and let your Mutual Fund investment grow over time! 🌱💹

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