Direct vs. Regular Mutual Funds: Save up to 1% Every Year by Cutting Out the Middleman (2025)

The Cost Difference

Currently, there are two ways to buy a mutual fund:

Regular Plans: These involve a middleman like a bank or a broker who gets a recurring fee for helping you. This fee is added to the fund’s annual maintenance cost. In 2025, the average cost for a Direct Plan is 0.46%, while a Regular Plan is much higher at 1.58%.

Direct Plans: You buy these directly from the fund company. Because there is no agent involved, the annual cost is much lower.

How Your Money Grows

Even a small difference of 0.73% in annual fees makes a big impact over time:

• Monthly Savings (₹10,000): After 5 years, people in Direct Plans end up with about ₹17,000 more than those in Regular Plans.
• One-time Investment (₹1 Lakh): The gap grows to over ₹8,000 extra in profit over the same period.

Which One Should You Choose?

Direct Plans give you better returns because your money isn’t being used to pay an agent. However, Regular Plans are still popular for beginners who want someone to guide them and manage their paperwork.

A Word of Caution

Experts suggest checking your knowledge before switching. Remember, moving your money from a Regular to a Direct plan is legally treated as “selling” your investment, which might mean you have to pay tax on your profits.