Direct vs Regular plan, honestly
Same fund, two price tags. What the difference costs over 15 years and when each one makes sense.
Every scheme comes in two plans, Direct and Regular, with the same manager and the same basket. The only difference is the cost, and that difference is often argued about dishonestly in both directions. Most apps and distributors sell Regular plans, so you deserve the full picture before you commit.
What the two plans are
- Regular plan. You invest through a distributor, such as an investing app or an individual MFD. The distributor's commission is built into the expense ratio, so the TER is higher. You do not pay the distributor separately.
- Direct plan. You invest straight with the AMC or through a platform that does not take commission. No distributor commission, so the TER is lower, typically by somewhere between 0.5% and 1.5% a year depending on the category. The exact gap is on every fund page.
Because the TER comes out of the NAV daily, a direct plan's NAV is a little higher than the regular plan's NAV of the same scheme, and that gap widens every year.
What the gap costs over time
Assume a ₹3,000 monthly SIP, which is what ₹100 a day adds up to. Assume the basket earns 12% a year before costs, and that the regular plan costs 1% more than the direct plan. The figures use an assumed rate for illustration and are not a forecast.
| Monthly SIP | ₹3,000 |
| Years | 15 |
| Total invested | ₹5,40,000 |
| Direct plan at 12% a year | ₹15.14 lakh |
| Regular plan at 11% a year | ₹13.77 lakh |
| Difference after 15 years | ₹1.37 lakh |
That difference is real money and it belongs on the table. It is the price of having a distributor. The honest question is whether what you get back is worth it.
What a distributor is for
A commission is not a tip. Under AMFI's code of conduct a distributor must do real work for it, and must tell you how much they earn.
- Suitability. Matching the fund family and riskometer to your goal, horizon and comfort with falls. A wrong category costs far more than a 1% fee.
- Behaviour. The biggest destroyer of SIP returns is stopping during a crash. Someone who stops you from doing that in 2008, 2020 or the next one has earned years of fees in a single conversation.
- Housekeeping. KYC, nomination, changing a bank, finding a forgotten folio, sorting a failed mandate, tax statements at year end.
- Disclosure. The distributor must show you a scheme-wise commission table and cannot promise returns. If yours will not, that is a red flag.
Regular is a fair deal when you actually use that help. Direct is a fair deal when you can pick a sensible category, set up the mandate, ignore the news and do the paperwork yourself. Both are legitimate. Neither is a scam.
What a distributor platform does and does not do
A distributor platform is an AMFI-registered distributor with an ARN and sells Regular plans. The commission it receives is inside the TER of the funds you hold, and the scheme-wise rates are shown in the app. A well-run platform does not charge a separate fee for investing, and it does not hold your money; orders go to an exchange platform such as BSE StAR MF and units sit in your own folio. If you want direct plans, you can buy them from the AMC's website, and nothing stops you from holding both.
Remember
- Direct and Regular are the same scheme. Regular has a higher TER because distributor commission sits inside it.
- On a ₹3,000 monthly SIP over 15 years, a 1% TER gap is roughly ₹1.37 lakh of difference at an assumed 12%.
- A distributor must disclose commission scheme-wise, check suitability, and cannot promise returns.
- Regular is fair if you use the help. Direct is fair if you do the work yourself. Both are legitimate.
- A distributor platform sells Regular plans, must disclose its commission, and should never hold your money.