Direct vs Regular Mutual Funds: Best Mutual Fund for You

So what’s the buzz around Direct vs Regular Mutual Fund?

If you’re an investor or are thinking about investing in mutual funds, we bet you’ve been subjected to an overload of welcomed or unwelcomed, legit or unsolicited advice on direct and regular mutual funds. So, what’s going on? Mutual funds are a popular investment choice for many, but when it comes to choosing between Direct and Regular plans, the decision can be confusing. Let’s break down the differences and help you understand which might be right for you.

Let’s understand the difference between regular and direct mutual fund better,

What Are Direct and Regular Mutual Funds?

Direct Mutual Funds are bought directly from the mutual fund house without involving any intermediary or distributor. Regular Mutual Funds, on the other hand, are purchased through intermediaries (banks, brokers, advisors) who earn a commission for their services.

Key Differences on Direct vs Regular Mutual Fund

Feature	Direct Plan	Regular Plan
Expense Ratio	Lower (No commission)	Higher (Includes advisor commission)
NAV	Higher	Slightly lower
Returns	Higher in the long run	Slightly lower
Investor Control	Full control	Managed by advisor
Availability	Online platforms (Groww, Zerodha Coin, etc.)	Banks, brokers, apps

You’d think that a direct fund is right for you because you don’t have to pay a commission! But hold on, there’s got to be a catch right?

Real Example: Impact on Returns for Direct Vs Regular Mutual Fund

Let’s say you invest ₹1,00,000 for 10 years, and both funds earn 12% annual return.

• Direct Fund Expense Ratio: 1%
• Regular Fund Expense Ratio: 2.5%

Maturity Value:

• Direct: ₹2,58,000
• Regular: ₹2,12,000

Difference: ₹46,000

Just a small change in expense ratio can result in significant gains over time!

What is NAV and Why Does It Matter?

NAV (Net Asset Value) is the per-unit price of a mutual fund. Since Direct Plans have lower expenses, their NAV grows faster, which means you accumulate more value for the same investment.

Where Can You Buy Direct and Regular Mutual Funds?

• Direct Plans:
  • Lxme (Lxme is a SEBI-registered mutual fund distributor under Anand Rathi Share & Stock Brokers Limited, with ARN 4478)
  • Groww (Clearly labels and provides Direct Mutual Fund Plans.)
  • Zerodha Coin (Offers only Direct Plans, free of distributor commissions)
  • MF Central (RTA-backed unified portal by CAMS + KFintech; supports both Direct & Regular Plans)
• Regular Plans:
  • Banks
  • Financial advisors
  • Insurance agents

So ask yourself these 5 questions before you decide to SWITCH or invest in a Direct Mutual Fund  

Do you understand the financial markets?

1. Can you undertake technical & fundamental analysis of all funds you invest in?
2. Can you make an investment decision without any guidance?
3. Do you have the time to track the market?
4. Are you willing to actively manage & rebalance your portfolio?

And all this amounts to a LOT of time. Are you ready to take on this responsibility and do you have the skill? 

It may seem like Direct Mutual Funds help you save by eliminating third-party commission charges, but it’s important to look at the bigger picture. While you might pay a small commission on a regular fund, the expertise, guidance, and convenience it offers can make a significant difference in your investment journey. That’s why choosing the right mutual fund platform is key to making informed decisions.

We hosted a LIVE session with industry expert and Lxme founder, Priti Rathi Gupta, to discuss and clarify the differences between Regular vs. Direct Mutual Funds, helping investors understand what works best for them.

These are the key takeaways from that informative session: –

1. For Regular Funds, the biggest asset is to have someone monitor your funds 24/7 giving you a constant edge in your investments. The guidance, expertise, and rebalancing come as part of a Regular Fund. Also in events like a market downfall, change in sectorial views, debt-equity ratio, and futuristic scenario, the fund manager steps in and guides the investor on the best possible outcome.
   
2. Of course overall returns are very crucial when it comes to your investments but understanding the opportunity cost – The 1% cost of regular funds in return for a 2-3% cost on guided and monitored investments is important to take note.
   
3. Direct Funds is not for all types of investors – An HNI investor who puts crores in Mutual Funds could consider Direct Plans however, even for that type of an investor, it’s important to constantly take out time to rebalance and scale the markets for best course of action which seems impossible.
   
4. Before choosing a Regular VS Direct fund, it’s important to ask yourself these important questions.
   What are the skills I have?
   What are the returns I need?
   And therefore, what is the best option for me between costs and returns.

Lxme is an AMFI-Registered Mutual Fund Distributor, regulated by SEBI. Lxme offers regular mutual funds, our portfolios are well-researched and curated by experts. We do a regular rebalancing and reviewing of your investments.

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FAQs – Common Questions on Direct vs Regular Mutual Fund

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