Direct Funds – Differences between a regular plan and direct plan

Ever heard someone say, “Just go for direct funds, they’re cheaper”? Well, that’s not just talk — it’s a whole investing philosophy in itself. If you’re scratching your head wondering what direct funds are or how they’re different from regular plans, buckle up. This guide is your ticket to understanding the ins and outs of direct mutual fund investing in India.

In a world where every rupee counts and financial freedom is the ultimate dream, knowing where and how to invest wisely can make a massive difference. That’s where direct funds come into play — simple, cost-effective, and powerful.

If you’re someone who loves a good deal or just wants to squeeze every paisa out of your investments, this is for you. Direct funds let you invest straight with the fund house, dodging those pesky commissions that nibble at your profits. Sounds tempting, right? On the flip side, it’s not all sunshine and rainbows – you’ll need to roll up your sleeves a bit more. Let’s dive into the nitty-gritty and figure out if direct funds are your kind of vibe!

Let’s roll up our sleeves and decode this beast, shall we?

What Are Direct Funds?

To put it plainly, direct funds are mutual funds that you buy directly from the fund house, without involving any middleman — like a distributor or broker.

In mutual fund speak, there are two types of plans under the same fund:

• Direct Plan
• Regular Plan

Both are identical in terms of portfolio and fund manager, but the charges and returns? That’s where the twist lies.

Breaking Down Direct Funds:

Here’s what makes a direct fund what it is:

• No intermediary: You invest directly with the fund house — online or offline.
• Lower expense ratio: No commissions mean lesser charges.
• Higher returns: Thanks to lower fees, direct funds generally yield better net returns over time.
• DIY investment: You need to do your own research or use a registered advisor.

In a nutshell, direct funds are mutual funds without the middleman markup. You’re flying solo — but with all engines firing.

Regular Plan vs Direct Plan – The Key Differences

So, what’s the real deal between direct and regular plans? Why is everyone jumping ship to direct funds in 2025?

Here’s a side-by-side comparison:

Cost Differences

First up, the biggie: cost. Direct funds are the budget-friendly option because they don’t saddle you with intermediary commissions. Picture this – a regular plan might have an expense ratio of 1.5%, while the direct version of the same fund clocks in at 0.5%. That 1% gap might not sound like much, but over years, it’s a game-changer. Less money down the drain means more in your pocket!

Returns

Here’s where it gets juicy. Lower costs with direct funds mean higher net returns, plain and simple. Let’s crunch some numbers:

• Say you invest Rs. 1,00,000 in a fund earning 10% a year before expenses.
• With a regular plan at 1.5% expense ratio, you’re looking at about Rs. 2,35,000 after 10 years.
• Switch to the direct plan at 0.5%, and you’re sitting pretty at Rs. 2,59,000.
• That’s an extra Rs. 24,000 just for dodging the middleman! Over decades, we’re talking serious dough.

Investor Suitability

Who’s this for, though? Direct funds are a dream for DIY investors – the ones who geek out over fund fact sheets and don’t mind tracking performance. If you’re comfy making your own calls, this is your lane. But if you’re still finding your feet or prefer someone else driving, regular plans might be more your speed. Paying for advice can be a small price for peace of mind, especially starting out.

Why Are Direct Funds Gaining Popularity in India?

You guessed it — cost-efficiency. But there’s more to it.

1. The Rise of DIY Investing

Thanks to tech-savvy millennials and Gen Z investors, people now prefer managing their own finances using apps like Zerodha Coin, Groww, Paytm Money, etc.

2. More Financial Literacy

Financial influencers (finfluencers), YouTube channels, and blogs are breaking down mutual funds like never before. More investors are aware of the cost-benefit game.

3. Transparency Is the New Normal

With SEBI-mandated disclosures and direct comparison tools, it’s easier than ever to see how much regular plans are eating into your wealth.

4. Compounding = Magic (If Costs Are Low)

Even a small difference in expense ratio magnifies over time due to compounding. Investors are finally waking up to this reality.

Pros and Cons of Investing in Direct Funds

Like anything in life, direct funds have their bright side — and their shadows.

Pros:

• Higher Returns: Every penny saved in fees adds to your final wealth.
• Transparency: You see exactly where your money goes.
• Empowerment: You’re in charge of your financial destiny.
• Ideal for long-term investors: Lower fees = better compounding.

Cons:

• No hand-holding: If you’re a beginner, the DIY route might seem overwhelming.
• Choice overload: Too many options can paralyze decision-making.
• Lack of personalized advice: Unlike regular plans, there’s no human to guide you unless you hire a paid SEBI-registered advisor.

Who Should Choose Direct Funds?

Alright, now let’s cut to the chase — are direct funds for everyone?

Here’s a checklist:

✔️ Go for direct funds if:

• You have a basic understanding of mutual funds.
• You’re comfortable using online platforms.
• You’re a long-term investor who can stick with the plan.
• You can do your own research or consult a fee-only advisor.

❌ Stick with regular plans if:

• You’re a complete newbie.
• You need regular portfolio reviews.
• You’re investing large sums and need hand-holding.

No shame in needing help. A regular plan may be costlier, but if it saves you from making bigger mistakes, it’s worth it.

How to Invest in Direct Funds? (Step-by-Step Guide)

Thinking of giving it a shot? Great! Here’s a simple guide to start investing in direct funds in India:

Step 1: Get Your KYC Done

• PAN card
• Aadhaar card
• Passport-sized photo
• Address proof

Most platforms offer eKYC now — smooth and paperless.

Step 2: Choose a Direct Investment Platform

• Fund house websites (like ICICI Prudential, HDFC Mutual Fund, etc.)
• Aggregator apps (Zerodha Coin, Kuvera, ET Money)

Step 3: Analyze & Select the Right Fund

Keep in mind:

• Fund category (Equity, Debt, Hybrid)
• Risk level
• Past performance (though not a guarantee)
• Fund manager credibility
• Investment horizon

Step 4: Create an Account

Register on the selected platform using mobile number, email, and basic KYC.

Step 5: Start Investing

You can start with as low as ₹100 in SIPs. Choose between SIP or lumpsum — your call.

Step 6: Track and Rebalance

Use dashboards to monitor performance. Rebalance annually or when market conditions change drastically.

Common Myths About Direct Funds 

Let’s bust some myths while we’re at it:

Myth #1: Direct funds are only for experts

Truth: If you can shop on Amazon, you can invest in direct funds with a little reading.

Myth #2: They’re unsafe

Truth: Same fund, same portfolio — only cheaper.

Myth #3: Advisors don’t support direct plans

Truth: SEBI-registered “fee-only” advisors will guide you, without commissions.

Myth #4: Too much paperwork

Truth: eKYC, digital onboarding, auto-debit SIPs — investing has never been easier.

Direct Funds vs Regular Plans – Real-Life Scenario

Let’s make this real with a story. Meet Priya, a 30-something techie from Bangalore. She’d been dumping Rs. 3,00,000 into a regular plan with a 1.7% expense ratio. Chatting with a friend, she heard about direct funds and got curious.

The same fund’s direct plan? Just 0.7%. Assuming a 12% annual return before expenses, here’s how it shook out over 10 years:

• Regular plan: Rs. 8,40,000.
• Direct plan: Rs. 8,85,000.
• That’s Rs. 45,000 extra for Priya – enough for a fancy vacation or a chunky emergency fund!

Switching gears, Priya did her homework, picked her funds, and kept an eye on them. Sure, it took some effort, but pocketing that savings? Totally worth it.

Popular Direct Mutual Funds in India (2025 Edition)

Here’s a list of trending direct funds with solid past performance:

1. Axis Bluechip Fund – Direct Plan – Growth
2. Mirae Asset Large Cap Fund – Direct Growth
3. Parag Parikh Flexi Cap Fund – Direct Growth
4. ICICI Prudential Equity & Debt Fund – Direct Growth
5. Nippon India Small Cap Fund – Direct Plan Growth

Note: Always analyze before investing — past performance isn’t a guarantee!

FAQs about Direct Funds

1. Are direct funds safe?

Absolutely. Direct funds are just another version of mutual funds, regulated by SEBI, with the same portfolio as regular plans.

2. How can I switch from a regular to a direct plan?

You’ll need to redeem your units from the regular plan and reinvest them into a direct plan. Some platforms allow switch options. Be mindful of exit loads and tax implications.

3. Do direct funds give better returns?

Yes, usually. Since they have lower expense ratios, your overall returns tend to be higher.

4. Can beginners invest in direct funds?

Yes, but it’s wise to start slow and do your homework or consult a fee-only advisor.

5. What’s the minimum amount to start investing in direct funds?

Most direct funds allow SIPs starting at ₹100 or ₹500. Lumpsum investments may start at ₹1,000.

6. Where can I compare direct and regular funds?

Websites like Value Research, Moneycontrol, and Morningstar offer great tools for side-by-side comparison.

7. Are direct funds taxable?

Yes, just like any other mutual fund. Equity funds held for over a year attract 10% LTCG tax beyond ₹1 lakh of gain.

Conclusion 

If you’re the kind of person who likes to drive your own car rather than take the back seat — direct funds are your best friend.

They offer:

• More control
• Lower costs
• Better potential returns

However, with great power comes… yep, greater responsibility. You’ll need to stay informed, monitor your investments, and maybe get expert (non-commissioned) advice when needed.

That said, switching to direct funds in 2025 might be the smartest money move you’ll make — a tiny change today that could snowball into massive wealth tomorrow.