Direct vs Regular Mutual Fund - Which is Better? (2023)

Every mutual fund comes in two versions – direct version and regular version.

One of the key distinctions between them is that regular mutual funds (MFs) have a distribution commission while direct mutual funds do not. This makes the expense ratio higher for regular funds. The expense ratio is the fund’s total expenses to its assets under management (AUM).

This is one of the reasons why direct mutual funds are better than regular ones. But note that there are other reasons for direct MFs beneficial for investors, compared to investment via regular MFs.

Difference Between Direct and Regular Mutual Funds

Low Expense Ratio

The expense ratio (fees charged by the mutual fund company) is much lower in direct mutual funds. So if a scheme charges 0.2% as expense ratio, what it essentially means is that 0.2% of AUM will be used to cover operating and administrative expenses of the funds.

Most people tend to take the help of their preferred mutual fund advisor or from their local financial advisory service provider when investing via regular funds.

But, the fee paid to the advisor comes out of your pocket. It is deducted straight from your investment amount and paid to the advisor or agent. This is mostly a part of the expense ratio of the fund. Hence higher commissions mean a higher expense ratio for mutual funds.

In direct plans of mutual funds, there are no commission fees or distribution charges. Hence the expense ratio is much lower.

(Video) Direct Vs Regular Mutual Fund | How to Make More Money by Investing in Direct Mutual Funds? ETMONEY

Plan1 Year Return5 Year Return10 Year ReturnExpense Ratio
As of September 21, 2021

Higher Returns

The returns of any direct mutual fund are always higher than the regular version of the same mutual fund. The main reason behind this is the ‘expense ratio’. The expense ratio is lower for direct plan vs regular plan as mentioned above.

Higher NAV

The Net Asset Value or NAV, of any direct mutual fund, is always higher than the regular version of the same mutual fund.

It represents the value of one unit of mutual fund and is determined by calculating the total assets owned by the fund and dividing it by the number of units outstanding.

The assets owned by the fund generally vary between debt instruments like debentures and bonds and equity instruments like company shares. In some cases, cash might also be a part of the assets owned. The total tally of these instruments is calculated to arrive at the assets owned by the fund.

If the fees paid to the agents can be avoided, then the amounting NAV could be higher.

(Video) How to switch from Regular Plan to Direct Plan | CA Rachana Ranade

As a result, direct funds have a higher NAV than regular funds of the same mutual fund.

Fewer Chances of Being Misled

While retail investors might think that having an advisor by their side will be helpful for their investment, they are only partially correct.

A look at the consumer forum will tell you that there is an umpteen number of complaints filed against wealth advisory agents who duped investors and stole millions. While not all agents are fraudulent, the mere fact that their compensation is on a commission basis and depends on your investment amount brings about a conflict of interest.

With direct funds, the chances of such activity are low.

You’re in Control

With direct funds, you’re fully in control of your mutual fund investments. Being in control also means that you need to do your own homework into studying about the funds. A little effort from your end can go a long way.

(Video) Direct Vs Regular Mutual Funds: Which is Better for You ?

You would have a complete understanding of how mutual funds work, how AMCs process transactions, updating your KYC and many other procedural tasks that will make you an empowered investor.

While the general populace might be content with commission-based agents shouldering their investments, it might be helpful to take a more active approach to your long-term financial goals.

Learn a bit about the AMC you want to invest in and compare their funds or take up the services offered by wealth management sites like Groww that help you build your own portfolio or invest in a pre-made portfolio based on your needs.

Happy investing!

Disclaimer: The views expressed here are of the author and do not reflect those of Groww.

(Video) Regular vs Direct Mutual Fund | Direct Vs Regular Mutual Funds | Mutual Fund direct plan vs regular


Direct vs Regular Mutual Fund - Which is Better? ›

Direct plans have lesser costs and give higher returns over regular plans. Over a sufficiently long investment horizon, the difference in returns can be substantial. However, you need to have some investment experience and knowledge to invest in direct mutual fund plans.

Is it good to invest in direct mutual funds? ›

In due course, the lower expense ratio of Direct Plan translates to higher returns on the investments which keeps compounding over the years. Thus, the investment in Direct Plan would be worth more over a period, in comparison to investment in Regular Plan of the same scheme.

Which is better direct growth or regular growth? ›

Higher Net Asset Value (NAV) of direct plans

The NAV of direct plans is higher than their regular counterpart because of their higher returns. As the operating expenses of the fund is reduced from its net AUM, the lower expense ratio of its direct plan results in higher NAVs.

Which type of MF is best? ›

Best Performing Debt Mutual Funds
Fund Name3-year Return (%)*5-year Return (%)*
SBI Magnum Medium Duration Fund Direct -Growth7.75%7.83%
Kotak Dynamic Bond Fund Direct-Growth7.24%7.74%
Edelweiss Banking and PSU Debt Fund Direct-Growth7.76%7.72%
HDFC Credit Risk Debt Fund Direct-Growth8.18%7.67%
6 more rows

Is it good to switch from regular to direct plan? ›

What is the benefit of switching to a direct mutual fund plan? Switching to a direct mutual fund increases your return on investment, unlike regular mutual funds that usually have a higher expense ratio thus reducing your ROI.

What are the disadvantages of direct mutual funds? ›

The disadvantage of taking the direct route is that you have to make all your investment decisions and complete the formalities on your own. Since you are buying a direct plan directly from a mutual fund company, you don't have access to a mutual fund advisor.

How can I transfer sip from regular to direct? ›

Visit the transaction page, where you can buy, change, or redeem your fund units. Select the 'switch' option and then click on the respective fund name. It will have a 'Direct Plan' option; click on it and follow the steps displayed. It will take about four working days to reflect the change.

Is Groww direct or regular? ›

All plans on our platform are direct plans. Read on to find out more on how to convert your regular mutual funds to direct mutual funds on Groww.

What is the Blue Chip fund? ›

Large caps funds are also known as or coined as Blue chip funds. Blue chip mutual funds are a type of equity funds that primarily invest in equity and equity related securities of large cap companies that can be distinguished by adjectives such as large and well-established, renowned and prestigious.

Which is the best long term mutual fund? ›

Top Performing Long-Term Mutual Funds to Invest in 2022
Fund NameCategory3 Year Returns
Mahindra Manulife Multi Cap Badhat YojanaDiversified29.70%
Mirae Asset Tax Saver FundEquity Linked Saving Scheme26.60%
Canara Robeco Equity Taxsaver fundEquity Linked Saving Scheme26.90%
UTI Nifty Index FundIndex Mutual Fund Growth20.70%
6 more rows

What is the best way to invest in direct mutual funds? ›

Online is the most convenient way to invest directly in Mutual Fund schemes and you get to save on commissions as well. You can invest online through a fund's website or its RTA's site or a fintech platform Investing directly on a fund's website requires you to manage multiple logins.

What is the difference between regular and direct plan? ›

1. Direct plans are directly offered by the fund houses whereas regular plans are bought through intermediaries or distributors like Independent financial advisers, banks or NBFCs. 2. Direct plans have no commissions and brokerage whereas for regular plans, commission or brokerage is paid to the intermediaries.

Which type of mutual fund is best for beginners? ›

List of Mutual Fund for Beginners in India Ranked by Last 5 Year Returns
  • Mirae Asset Tax Saver Fund. ...
  • ICICI Prudential Equity & Debt Fund. ...
  • Canara Robeco Equity Tax Saver Fund. ...
  • DSP Tax Saver Fund. ...
  • Kotak Tax Saver Fund. ...
  • Edelweiss Aggressive Hybrid Fund. ...
  • Baroda BNP Paribas Aggressive Hybrid Fund. ...
  • Canara Robeco Equity Hybrid Fund.

What is the safest mutual fund? ›

Bond Mutual Funds

The three types of bond funds considered safest are government bond funds, municipal bond funds, and short-term corporate bond funds.

Which mutual fund is best for 5 years? ›

10 Mutual Funds That Tripled Wealth in 5 Years
  • Reliance Small Cap Fund. ...
  • HDFC Small Cap Fund – Direct – Growth. ...
  • Mirae Asset Emerging Bluechip Fund – Direct – Growth. ...
  • Principal Emerging Bluechip Fund – Direct – Growth. ...
  • HDFC Mid-Cap Opportunities Fund – Direct – Growth. ...
  • Axis Long Term Equity Fund – Direct – Growth.
Mar 28, 2022

Can I convert regular fund to direct fund? ›

Ans. Yes. You can change your mutual fund from a regular to a direct plan. However, since this switch is considered as the redemption of one scheme and new investment to the other (via direct plan), there are certain expenses that you will have to incur during the process.

Which app is good for mutual funds? ›

Best Mutual Fund App in India – List of Top 10 Mutual Funds App for Direct SIP
RankMutual Fund Apps
1Zerodha Coin App
2Groww App
3ET Money App
7 more rows
May 11, 2022

Can I move money from one mutual fund to another? ›

You may be able to transfer mutual funds from one financial institution to another. Some mutual funds are “proprietary” and only offered by certain financial institutions. If this is the case, you may not be able to transfer them without cashing them out. This can have tax consequences and may trigger fees.

What is the benefit of direct mutual fund? ›

Benefits of Investing in Direct Mutual Funds

Investor directly purchases the fund units from the fund house without any 3rd party involved. Direct schemes have lower expense ratio as compared to regular schemes, which helps the investor earn higher returns in the longer run.

Which is better direct growth or direct dividend? ›

The NAV of growth option will always be higher than the dividend option because the profits re-invested in the growth option may grow in value over time. The total returns of growth option are usually higher than dividend option over sufficiently long investment horizon due to compounding effect.

How do I sell a regular mutual fund? ›

4 steps to selling a mutual fund
  1. Contact your financial advisor or mutual fund company. Get in touch with the advisor who sold you the fund, or someone in their company. ...
  2. Ask about any fees or charges. ...
  3. Decide how many units or shares you want to sell. ...
  4. Give instructions on what to do with the money.
Aug 30, 2021

How do I cancel my regular mutual fund? ›

Inform the mutual fund house and the bank from which the payments are made towards SIP. Fill the relevant form issued by the asset management company (AMC). You have to mention the date from which you would like to discontinue the SIP. Submit the form to the AMC.

Does switching mutual funds taxable? ›

Since switching from regular funds to direct mutual funds is considered as a new investment, the switch can attract tax on capital gains. The applicable taxes can also vary depending on the type of capital gains i.e. long-term or short-term capital gains.

Which is better Zerodha or Groww for stocks? ›

Both the brokers are Discount Brokers. Zerodha is having overall higher rating compare to Groww. Zerodha is rated 4.5 out of 5 where Groww is rated only 4 out of 5. Number of active customer for Zerodha is 63,96,714 where number of active customer for Groww is 40,63,750.

Is Groww app safe? ›

Groww is a safe and secured app with SSL certification and 128-bit encryption keeping the information secured. Moreover, the Groww mutual fund transactions are done via BSE and thus are completely safe.

Is Groww a direct mutual fund? ›

Groww started in 2016 as a direct mutual fund platform. By investing in direct mutual funds, investors can save significantly and earn 1.5% extra returns on their investments. Investing in Mutual funds through Groww is free, as there are no account opening charges, subscription fees, commission, or redemption charges.

Which mutual fund is best for SIP? ›

List of Best SIP Funds in India Ranked by Last 5 Year Returns
  • Quant Active Fund. N.A. ...
  • Parag Parikh Flexi Cap Fund. Consistency. ...
  • PGIM India Flexi Cap Fund. Consistency. ...
  • Quant Large and Mid Cap Fund. ...
  • Mirae Asset Emerging Bluechip Fund. ...
  • Quant Focused Fund. ...
  • Canara Robeco Emerging Equities Fund. ...
  • Edelweiss Large & Mid Cap Fund.

Which Bluechip fund is best? ›

  • IDBI India Top 100 Equity Fund.
  • Canara Robeco Bluechip Equity Fund.
  • Kotak Bluechip Fund.
  • ICICI Prudential Bluechip Fund.
  • BNP Paribas Large Cap Fund.
  • SBI Bluechip Fund.
  • Invesco India Largecap Fund.
  • Aditya Birla Sun Life Frontline Equity Fund.
5 days ago

Are bluechip funds safe? ›

Blue chip stocks are usually less risky and thus considered safer than other stock-based investment options. That's because one of the major determining factors of a blue chip stock is that it must be a well-capitalized company, meaning it should have the financial fortitude to endure an inevitable economic downturn.

Which fund gives highest return? ›

List of Equity Mutual Funds in India
Fund NameCategory1Y Returns
PGIM India Flexi Cap FundEquity4.5%
Quant Large and Mid Cap FundEquity13.3%
Axis Growth Opportunities FundEquity8.6%
BOI AXA Tax Advantage FundEquity5.2%
12 more rows

Which SIP is best for 20 years? ›

12 Best SIPs For 10-20 Year Investment In FY 21 - 22
Fund Name5-Year Returns (In%)Expense Ratio (In %)
Mirae Asset Large Cap Fund17.881.59
Canara Robeco Emerging Equities Fund20.391.85
Axis Focus 25 Fund20.431.74
IDFC Banking & PSU Debt Fund7.620.62
8 more rows

Which mutual fund is best for 10 years? ›

1] Nippon India Small Cap Fund: This growth fund has given better return than its category average in last 10 years.

What is the benefit of direct mutual fund? ›

Benefits of Investing in Direct Mutual Funds

Investor directly purchases the fund units from the fund house without any 3rd party involved. Direct schemes have lower expense ratio as compared to regular schemes, which helps the investor earn higher returns in the longer run.

Why mutual funds are better than direct investment? ›

In mutual funds, the fund manager ensures investment in different sectors and is tracking the market all the time. Whereas, direct stocks come with higher risks. To diversify here would mean to invest in many different industries with a considerable amount of invested capital.

Is direct equity risky? ›

Direct equity is risky but it also open doors for higher returns. Return of direct equity (in long term) can outperform any other asset class. But the only precondition is, one should know to value stocks and time the market.

Is direct equity a good investment? ›

Advantages. Probability of High Returns: Investing in direct equity has the potential to generate higher returns in comparison to other investment avenues. Investors can earn not just through dividends but also capital appreciation, which helps in wealth creation in the short and long run.


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