Direct vs Regular Mutual Funds: Choosing Better Investments

Direct vs Regular Mutual Funds

Mutual funds are one investment option that can yield markable returns compared to the Index Nifty 50. Every mutual fund scheme is classified into growth, Dividend, Regular, and direct plans.

It’s been quite an interesting debate on direct vs regular mutual funds; which one to choose? Every investor shuffles between millions of ideas and recommendations around the internet.

In this article, I will break down the concepts of direct and regular funds; you will also get an unbiased difference between direct and regular mutual funds.

What are Direct Mutual Funds?

Direct Mutual Funds

A direct plan is an option provided with every mutual fund scheme, where an investor can invest directly in the fund house. So, there is no involvement of broker firms or mutual fund distributors.

You can invest directly in AMC (Asset management company) websites or AMC registered offices nearby in your city. Similarly, online broking websites like upstox can be used to invest direct funds.

The major difference between direct vs regular mutual funds is the expense ratio. Since, there is no involvement of distributors, the TER (Total expense ratio).

Recommendation:

Invest in direct funds only if you have the experience to manage the risk associated with the funds, and stay as an investor during bearish fluctuation. If not, we recommend contacting an experienced mutual fund distributor like Fincareplan to assist in investments.

What are Regular Mutual Funds?

A regular is an option provided with every mutual fund scheme, where an investor invests with the help of mutual fund distributors or broking firms. You will follow your distributor guidelines when it comes to regular funds.

The mutual fund distributors will have their website through which you will initiate the transactions. The distributor will guide you in choosing the fund that could help you achieve your goals and plan according to your risk appetite.

The expense ratio, NAV, and returns are major differences between regular vs direct mutual funds. Since distributors help you in all parts of the investment journey, regular funds’ TER (Total expense ratio) is comparatively higher than direct funds.

Difference Between Direct and Mutual Fund:

On the foremost, direct and regular mutual funds are part of every schemes. You should be aware on the process of choosing a mutual fund.

Axis Small Cap Funds - Direct Plan Axis Small Cap Funds - Regular Plan
Expense Ratio
0.46%
1.92%
SIP per month
Rs. 15,000
Rs. 15,000
5 Years Performance
19.53%
17.87%
5 Years Investment
9 Lakhs
9 Lakhs
Return Post 5 Years
15.3 Lakhs
14.59 Lakhs

Performance of the fund:

The above table shows the difference between Axis small-cap fund’s regular and direct plans.

You got it right. Yes, the difference between expense ratios is proportionally the same as the difference in 5 year’s performance.

This proves that the expense ratio implies the fund’s performance. The difference between direct and regular funds show direct funds have higher performance on a whole.

The difference in return for 5 years would be microscale. But, this difference of 1.66% in return every year would reach a difference of a few lakhs when invested for 10+ years.