Direct vs Regular Mutual Funds in India: Save More with Direct Plans
Nov, 18 2025
When you invest in mutual funds in India, you’re not just picking a fund-you’re choosing how you pay for it. And that choice can cost you thousands over time. Most people don’t realize that two versions of the same mutual fund exist: direct mutual funds and regular mutual funds. They track the same index, hold the same stocks, and are managed by the same fund house. But one saves you money-big time.
What’s the real difference between direct and regular mutual funds?
The only difference is how you buy them-and who gets paid in the process.
Regular mutual funds are sold through advisors, brokers, or platforms like Zerodha, Groww, or Paytm Money. These intermediaries earn a commission from the fund house for bringing you in. That commission comes out of your returns. It’s built into the fund’s expense ratio.
Direct mutual funds are bought straight from the fund house-through their website, app, or offline office. No middleman. No commission. That means lower costs, and more of your money stays invested.
Here’s the math: A regular plan might charge an expense ratio of 2.25%. A direct plan for the same fund? Often 1.05%. That’s a 1.2% difference. Sounds small? Over 15 years, on a ₹5 lakh investment growing at 12% annually, that difference turns into ₹2.8 lakh extra in your pocket.
Why do people still choose regular plans?
Because they think they need help.
Many investors believe they don’t know enough to pick funds on their own. So they rely on an advisor who promises to ‘guide’ them. But here’s the truth: most advisors don’t customize your portfolio. They push funds that pay them the highest commission-not the ones that suit your goals.
A 2023 SEBI study found that 68% of regular plan investors didn’t even know their fund’s expense ratio. And 52% couldn’t explain why they were paying more for the same fund.
Advisors often say, ‘I’ll monitor your portfolio.’ But do they? Most only check in when you call. And if you’re not calling, they’re not doing anything. Meanwhile, direct plans give you full control-and free tools to track performance, rebalance, and switch funds.
How much money can you actually save?
Let’s compare two identical funds: HDFC Balanced Advantage Fund.
- Regular plan expense ratio: 2.27%
- Direct plan expense ratio: 1.09%
That’s a 1.18% gap. Now, assume you invest ₹10,000 per month for 20 years. With an average annual return of 11% before expenses:
- Regular plan final value: ₹89.6 lakh
- Direct plan final value: ₹1.07 crore
You gain ₹17.4 lakh just by choosing direct. That’s enough to buy a used car-or fund your child’s college education.
And this isn’t rare. Across equity funds, the average difference between direct and regular plans is 0.8% to 1.5%. Debt funds? Even bigger gaps-up to 0.7% because their returns are lower to begin with.
Can you switch from regular to direct?
Yes. And you should.
SEBI allows you to switch from regular to direct plans without any exit load, as long as you’re not redeeming. You’re not selling the fund-you’re just changing how you hold it.
Here’s how:
- Log in to the fund house’s website (e.g., HDFC Mutual Fund, ICICI Prudential, SBI).
- Go to ‘Switch’ or ‘Plan Change’ under your portfolio.
- Select your regular plan and choose the direct version of the same fund.
- Confirm the switch. It takes 2-3 business days.
Important: You can’t switch through apps like Groww or Zerodha. You must go directly to the fund house. Some apps let you buy direct funds, but not switch existing regular ones.
What about platforms like Groww, Zerodha, or Paytm Money?
They offer direct plans too-but only if you buy new investments through them.
If you already own regular plans bought through them, they can’t convert them to direct. You still need to go to the fund house.
Platforms like Groww and Zerodha make money from other sources: brokerage, premium features, or partnerships. They’re not earning commissions from your mutual fund. That’s why they push direct plans. They want you to stay with them-and save money.
So if you’re using one of these apps, stick with them for new investments. But for old regular plans? Switch them yourself.
Who should stick with regular plans?
Only two groups.
First: Investors who genuinely need ongoing advice and can’t manage their own portfolio. If you’re unsure about asset allocation, tax-saving strategies, or when to rebalance, a fee-only advisor (not commission-based) might be worth the cost.
Second: Older investors who are uncomfortable with digital platforms. If you’re 70 and don’t trust online systems, a trusted agent might give you peace of mind. But even then, ask: ‘What’s my expense ratio?’ and ‘How much do you earn from this fund?’
Everyone else? You’re paying for a service you don’t use. And you’re losing money doing it.
How to start with direct mutual funds
Getting started is simple.
- Complete your KYC (if you haven’t already). It’s valid across all fund houses.
- Go to the website of any fund house-SBI, Axis, Kotak, or ICICI.
- Create a login. Use your PAN and bank details.
- Search for the fund you want. Look for the word ‘Direct’ next to it.
- Start SIP or lump sum. Done.
You can also use the AMFI website to compare all funds side-by-side. It’s free, official, and updated daily.
Pro tip: Don’t chase returns. Look at 5-year and 10-year performance. Avoid funds that have changed managers in the last year. And always check the expense ratio before investing.
Common myths about direct mutual funds
- Myth: Direct plans are riskier. Truth: Same fund, same portfolio. Risk is identical.
- Myth: You’ll miss out on portfolio reviews. Truth: Most advisors don’t review portfolios unless you ask. You can use free tools like Value Research or Morningstar to track performance.
- Myth: Direct plans are hard to manage. Truth: Apps like Coin by Zerodha and ET Money make it easier than ever. You can set SIPs, track returns, and switch funds in minutes.
The only real barrier is effort. You have to take one step: switch.
What happens if you do nothing?
If you keep your regular plans, you’re quietly handing over 1% of your returns every year to someone who didn’t add value.
Over 20 years, that’s not just lost money. It’s lost opportunities. That money could’ve bought a home down payment. Paid off debt. Funded early retirement.
There’s no hidden penalty for switching. No tax impact. No lock-in. Just pure, clean savings.
Start with one fund. Switch it. See the difference. Then move the next. In six months, you’ll be running your portfolio like a pro-with no one taking a cut.
Are direct mutual funds better than regular ones?
Yes, for most investors. Direct mutual funds have lower expense ratios because they don’t pay commissions to advisors or platforms. This means more of your money stays invested, leading to higher returns over time. The fund’s performance and holdings are identical to regular plans-only the cost structure changes.
Can I switch from regular to direct mutual funds?
Yes, you can switch without exit load or tax implications. Go directly to the fund house’s website (like HDFC, ICICI, or SBI), log in to your account, and use the ‘Switch’ option to change from regular to direct plan. You cannot do this through third-party apps like Groww or Zerodha-they only let you buy new direct plans, not convert existing ones.
Do direct mutual funds have lower returns?
No. Direct mutual funds have the same underlying portfolio and fund manager as regular plans. The only difference is cost. Lower expenses mean higher net returns. For example, a fund with a 1.2% lower expense ratio can generate over ₹15 lakh extra over 20 years on a ₹10,000 monthly SIP.
Are direct mutual funds only for experienced investors?
No. Direct plans are ideal for anyone who wants to save money. You don’t need to be an expert. Free tools like Value Research, Morningstar, and the AMFI website help you compare funds, check performance, and understand risk. Many investors start with direct plans and learn as they go.
Why do brokers still push regular plans?
Brokers earn commissions from regular plans-often 0.5% to 1.5% of your investment annually. That’s a steady income stream. They’re not required to disclose how much they earn. Direct plans pay them nothing. So they have no incentive to recommend them, even though they’re better for you.
Next steps: What to do today
Don’t wait for ‘the right time.’
Right now, open your last mutual fund statement. Find the expense ratio. Look for the word ‘Regular.’
If you see it, go to the fund house’s website. Switch it to direct. It takes 10 minutes.
Do that for one fund. Then do it for the next. In six months, you’ll have a portfolio that’s fully yours-with no one taking a cut.
That’s not investing. That’s reclaiming your money.