Mutual Funds

Direct vs Regular Funds, simplified

Direct or regular mutual fund - which one’s right for you? Understand the key differences, pros, cons, and how to pick the smarter option for your money.

Team Dhan

15 Jul 2025 — 4 min read

Photo by Ian Talmacs / Unsplash

When it comes to mutual funds, you’ll often hear about two types: direct plans and regular plans. One of the biggest differences between them is how they handle commissions. Direct mutual funds skip the middlemen, so there are no distribution fees — unlike regular plans, which pay commissions to agents or platforms.

That’s one reason why more investors are leaning towards direct plans. But lower fees aren't the only advantage — there are a few more worth knowing. If you want to make smarter investment choices, it’s important to understand the real difference between direct and regular mutual funds.

Difference simplified

Ever wondered what a direct mutual fund really is? It’s pretty straightforward, you invest directly through the fund house (AMC), without any broker or middleman involved. Since there’s no distributor in the middle, there are no commission fees, which means you get a lower expense ratio and better returns over time.

On the flip side, a regular mutual fund involves third-party intermediaries like brokers, bank RMs, or advisors. These professionals help guide your investment decisions, but they also charge a commission, which increases the fund’s expense ratio. Regular plans work well if you prefer expert guidance and don’t want to manage everything yourself.

Comparing Direct vs Regular

The difference between direct and regular mutual fund plans is something that you should think about when investing in mutual funds. Both give you access to the same fund and base assets, but they do so in very different ways and for very different prices. To help you understand this better, here is a table:

Criteria	Direct Mutual Funds	Regular Mutual Funds
Expense Ratio	Lower since there are no intermediary costs.	Higher due to commission to distributors.
Mode of Purchase	Invested through AMC platforms or apps directly.	Purchased via banks, brokers, or advisors.
Accessibility	User-friendly online platforms are available.	Requires third-party assistance for most steps.
Returns	Higher long-term returns due to lower fees.	Slightly reduced returns (0.5% to 1% lower).
NAV (Net Asset Value)	Higher NAV because fewer expenses are deducted.	Lower NAV owing to commission and fees.

Direct Funds

Direct plans can be a great option, especially if you like to manage your money on your own. But they do come with a few trade-offs. Here’s a quick look at the upsides and downsides:

Benefits of Direct Plans

Lower Costs: No middlemen means no commissions — so more of your money stays invested.
Higher NAV: Since there are no distributor payouts, the fund’s Net Asset Value (NAV) tends to be slightly higher.
Better Long-Term Returns: Even a small difference in expenses (like 0.5%) can make a big difference in how much you earn over the years.

Drawbacks of Direct Plans

No Professional Help: You’re on your own — so you’ll need to research, compare, and make all the decisions yourself.
Choosing the Right Fund Can Be Hard: With so many options, it can feel overwhelming — especially if you’re new to investing.
Risk of Bias: Without expert input, you might lean too heavily toward one type of fund or asset class, which can hurt returns or increase risk.

Regular Funds

Regular plans are great for those who want a little hand-holding, especially if you're just starting out with mutual funds. They come with professional guidance, but that convenience comes at a cost. Here's a quick breakdown:

Benefits of Regular Plans

Expert Advice: A financial advisor recommends funds based on your goals, risk appetite, and how long you want to invest.
Less Hassle: From paperwork to portfolio rebalancing, your advisor takes care of everything.
Ongoing Guidance: Advisors keep an eye on your investments and suggest changes when needed.
Added Services: They also help with tracking performance, providing account statements, redemptions, and more.

Drawbacks of Regular Plans

Higher Costs: The convenience comes with a price — advisory fees increase your expense ratio.
Lower NAV: Since commissions are paid out, the fund’s NAV is slightly lower compared to direct plans.
Smaller Long-Term Returns: Over time, these costs can eat into your gains, especially when compared to direct plans.

How to know if you’re investing Direct or Regular?

It’s easy to get confused between direct and regular mutual fund plans — they often look the same at first glance. But here are a few quick tips to help you tell them apart:

Check the Scheme Name: If the fund has “Direct” or “Dir” in the name, it’s a direct plan. If it says “Regular” or “Reg,” then it’s a regular plan.
Compare the Fees: Look at the expense ratio. Direct plans usually have lower fees since there are no distributor commissions.
Look at the NAV: The Net Asset Value (NAV) is typically higher in direct plans compared to regular ones because of lower costs.
Review Your CAS Statement: Check your Consolidated Account Statement (CAS). If you see an ARN (Advisor Registration Number) under the "Advisor" section, you’re likely in a regular plan.

These quick checks can help ensure you’re in the type of plan that best suits your investment style.

So, which one is right for you?

Direct mutual fund plans work best for investors who like to take charge — they save you money on commissions and offer better returns over time. Regular plans are a better fit if you value expert advice and want someone to help guide your decisions, even if it comes with slightly higher costs.

At the end of the day, the choice between direct and regular mutual funds depends on your confidence, experience, and personal financial goals.

Pick the path that fits your journey — and helps you grow your money, your way.