ARTICLE OVERVIEW
What this article covers:
- What direct and regular plans are — and how they differ
- Where the commission goes in a regular plan (and who pays it)
- Real numbers: how much difference it makes over 10–20 years
- Who should choose the direct plan, and who is better off with regular
- How to switch from a regular to a direct plan (and whether you should)
When you go to invest in a mutual fund, on Groww, Zerodha, or even your bank’s app — you’ll notice two versions of the same fund: Direct vs Regular mutual fund Plan. Same fund name. Same fund manager. Same portfolio. But different returns.
The only question is: direct ya regular plan lena chahiye? The answer depends on one thing that most investors never think about: who’s paying the middleman.
What is a Regular Plan in Mutual Funds?
A regular plan is what you get when you invest through a distributor: a bank, a broker, a financial advisor app, or an agent. These intermediaries help you choose a fund, handle the paperwork, and sometimes provide advice.
In return, the Asset Management Company (AMC) pays that distributor a commission every year. This commission, called a trail commission, typically ranges from 0.5% to 1.5% per year of your invested amount, depending on the fund category.
Here’s the part that surprises most people: you don’t pay this commission separately. It’s already baked into the fund’s expense ratio. So your NAV grows slightly slower in a regular plan compared to a direct plan, because a portion of the fund’s returns is going to the distributor.