Open any mutual fund's factsheet and you'll see two versions of the same scheme: Direct and Regular. They hold the exact same stocks or bonds, are managed by the exact same fund manager, and follow the exact same strategy. The only difference is the expense ratio — the annual fee deducted from the fund's returns — and that one number is where the gap in your eventual returns comes from.
Why the fee is different for an identical portfolio
A regular plan's higher expense ratio pays a distributor's trail commission for having sold you the fund, year after year, for as long as you stay invested. A direct plan is bought straight from the AMC with no distributor in between, so there's no commission to pay, and the expense ratio is lower — typically by somewhere around 0.5 to 1 percentage point a year, though the exact gap varies by scheme and category.
What a 0.8-point gap actually costs
An expense ratio difference sounds trivial as a single number, but it's deducted every single year, for every year you stay invested, from the full value of your holding — not just your original contribution. Over a SIP held for 15 or 20 years, that annual drag compounds into a total cost that can run into several lakhs of rupees for a long-term investor, purely from the fee gap, with nothing else about the investment changed.
Where to actually check this
- The expense ratio for both plans is printed on the scheme's factsheet — it's one of the first numbers listed.
- Compare the expense ratio alongside the fund's category average, not in isolation; some categories run higher fees across the board.
- If you already hold a regular plan, switching to the direct version of the same scheme is usually possible, though it's worth checking any exit load or tax implications first.
The /funds category heatmap is a useful way to see how a whole category is moving, and WealthCraft, NexImpera's mutual fund course, covers exactly this kind of factsheet reading in more depth.
See the WealthCraft mutual fund course →Common questions
Can I switch from a regular plan to a direct plan of the same fund?
Usually yes, though it's worth checking any applicable exit load and tax treatment on the switch first -- the two plans are technically different scheme codes even though the portfolio is identical.
Does the expense ratio gap vary by fund category?
Yes -- the typical gap between direct and regular expense ratios differs by category and by AMC, which is another reason to check the actual figure on each fund's factsheet rather than assume a fixed number.
Does a direct plan ever perform worse than a regular plan?
The underlying portfolio performance is identical since both plans hold the same securities -- the direct plan's net return to you is higher purely because less is deducted in fees, not because the portfolio itself performs differently.
A direct and a regular plan hold an identical portfolio; the only difference is the expense ratio, which pays a distributor's commission in the regular version. That gap, deducted every year for as long as you stay invested, compounds into a real rupee cost over a long holding period -- and it's printed on the factsheet, so it's always worth checking before you buy.
