When you search for any mutual fund in India, you'll notice two versions: Direct Plan and Regular Plan. They hold the exact same portfolio, managed by the exact same fund manager. The only difference is cost — and that difference compounds into lakhs over a decade.
When you invest through a broker, bank relationship manager, or mutual fund distributor, you're buying the Regular Plan. The fund house pays your distributor a commission — typically 0.5–1% of your invested amount annually — and this cost is embedded in the fund's expense ratio.
When you invest directly through the fund house's website, AMFI platforms (like MF Central) or zero-commission apps (like Kuvera, Zerodha Coin), you buy the Direct Plan. No distributor, no commission, lower expense ratio.
| Feature | Direct Plan | Regular Plan |
|---|---|---|
| Expense ratio | Lower by 0.5–1% | Higher |
| NAV | Always higher | Always lower |
| Returns | Higher by 0.5–1% annually | Lower |
| Where to buy | AMC website, Kuvera, Groww, Zerodha Coin | Bank, broker, agent |
| Advice included | None (self-directed) | Distributor guidance |
| Portfolio | Identical — same stocks, same fund manager | |
Let's put real numbers on this. Assume you invest ₹10,000/month via SIP for 20 years, and the fund earns 14% CAGR before costs.
| Direct Plan (0.5% TER) | Regular Plan (1.5% TER) | |
|---|---|---|
| Net CAGR | 13.5% | 12.5% |
| Total invested | ₹24 lakh | ₹24 lakh |
| Corpus after 20 years | ₹1.48 crore | ₹1.25 crore |
| Difference | ₹23 lakh more in Direct Plan | |
₹23 lakh. On the exact same fund, with the exact same portfolio. The only difference is where you bought it. This is why Finance101 only tracks and recommends Direct Plans.
Since Direct Plans have a lower expense ratio, more of the fund's gains go back to investors — and therefore the NAV grows faster. Over time, the NAV of the Direct Plan will always be higher than the Regular Plan of the same fund.
For example, Mirae Asset Large Cap Fund Direct Plan NAV is ~₹128, while its Regular Plan NAV is ~₹114. That gap started at zero when Direct Plans were introduced in 2013 — it grew entirely due to the expense ratio difference compounding over 12 years.
Many investors think a higher NAV means a fund is "expensive" and avoid it. This is wrong. NAV simply reflects the current value of your units. A fund with NAV ₹500 is not more expensive than one with NAV ₹50 — what matters is percentage return, not absolute NAV.
If you've been investing through a bank or broker, you're almost certainly in the Regular Plan. Here's how to switch:
If you're switching a large corpus, consider spreading the switch over 2–3 months to reduce timing risk. Also, verify with a CA whether the tax impact changes your decision — sometimes Regular Plan investors with large unrealised gains may prefer to wait for a tax-efficient year to switch.
Use Finance101's Direct vs Regular calculator to compare the long-term cost on your specific fund and SIP amount.
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