Regular vs direct mutual funds: The same road, two very different journeys

Imagine two friends standing at the start of the same long road. Both want to reach “financial freedom”. Both choose the same mutual fund. But one takes a path lined with signboards, agents and middlemen while the other takes the cleaner, quieter path — no guides, no hand-holding, just the fund itself.

They start at the same time.

They invest in the same fund and same amount.

Yet, years later, the gap in their wealth feels almost unfair.

This, in a nutshell, is the story of regular vs direct mutual funds.

What exactly is the difference?

1. The middleman factor

Regular funds: Sold through agents/distributors. They help you pick funds, fill forms and may guide you. For this, the fund house pays them a commission.

Direct funds: You buy directly from the fund house or an app that doesn’t take commission. No middleman. No extra fee.

Think of it like buying vegetables — either directly from a farmer or from a shop that adds mark-up.

Same tomatoes, different prices.

2. The expense ratio

This is the annual fee fund houses charge to manage your money.

• Regular plans: Higher expense ratio because distributor commissions are included.
• Direct plans: Lower expense ratio because no commissions are paid.
• Typical difference: 0.5% to 1.5% depending on the fund

That may look tiny. But in investing, tiny leaks sink big ships.

3. How this affects your returns

Because expenses are deducted from your gains, direct funds almost always deliver higher returns than regular funds of the same scheme.

Here’s what it looks like:

If both funds earn 12%, regular may give you Rs 10.8–11.2% while direct may give you the full 12% minus minimal costs

Over 10–15 years, this snowballs into a noticeable gap and over 20–25 years, the difference becomes a shock.

A ₹10,000/month SIP for 20 years could have ₹10-15 lakh more in a direct plan than the same SIP in a regular plan.

4. Convenience vs control

Regular funds:

• Comfortable if you want someone to help you choose
• Useful for beginners afraid of making mistakes
• But you pay for this comfort every year

Direct funds:

• Best if you're willing to do basic research
• More control lower costs = better long-term wealth
• Requires discipline, not expertise

5. Which one should you choose?

If you genuinely need guidance and aren’t ready to do even minimal homework, regular plans are acceptable, but understand you’re paying for the service continuously.

But if you’re even slightly aware, can read a few basics and want to squeeze maximum value out of your hard-earned money, direct plans are the plain, simple, no-nonsense choice.

The road you choose matters

In life and money, small differences add up. Regular and direct mutual funds may look identical — same fund manager, same portfolio, same risk. But one is weighted with invisible fee, while the other lets your money breathe and grow.

The truth is simple: Direct funds let compound interest work at full strength. Regular funds work with a handicap.

At the end of the journey, both roads lead to the same destination, but one quietly drains your wealth along the way, and the other quietly builds it. And when your future self looks back, you’ll wish you had chosen the path with fewer leaks and more clarity.

The choice isn’t complicated. It’s simply about keeping more of what’s yours because you earned it, not your middleman.