Investors often face confusion when choosing between regular mutual funds and direct mutual funds. At first glance, the difference may seem minor, but the impact on long-term returns can be significant. While direct plans come with lower costs and no commission, regular plans offer expert guidance, financial planning support, and behavioural discipline — something many investors need during market volatility.
To break down this comparison in detail, CNBC-TV18 spoke with Santosh Joseph, Founder & Partner at Germinate Investor Services LLP, and Sandipan Roy, CIO at MO Private Wealth. Both experts agree that although direct plans appear cheaper, choosing the right plan should depend on more than just cost.
Direct mutual funds are purchased directly from fund houses, which means no distributor commission is involved. This reduces expense ratios, allowing investors to potentially earn better long-term returns.
Key features of direct plans:
Lower expense ratios
No middleman or commission fees
Higher return potential over long duration
Full control over fund selection and portfolio management
However, with control comes responsibility. An investor must research, analyse performance, track market conditions, review fund managers, and rebalance portfolios regularly. Without experience, wrong decisions can lead to lower returns or unnecessary risk.
Direct funds work best for:
✔ Experienced investors
✔ Those who understand asset allocation
✔ Individuals who review markets regularly
✔ Investors comfortable managing portfolios independently
Regular mutual funds are bought through distributors or advisors. In exchange for commission, investors receive guidance on fund selection, risk assessment, long-term planning, and emotional discipline during market fluctuations.
Why many investors still prefer regular plans:
A financial advisor helps build long-term wealth strategy
Better risk management and fund diversification
Guidance prevents mistakes like panic selling during market crashes
Helps align investments with retirement and life goals
Santosh Joseph highlights an important psychology factor:
People consider direct plans cheaper, but ignore that regular plans include mentorship, behavioural support, and long-term planning – benefits that many investors really need.
Often, the biggest financial loss does not come from market performance, but from investor decisions like early redemption or panic selling. An advisor prevents these mistakes, and the saved loss itself becomes profit.
Sandipan Roy notes that the expense difference between direct and regular plans averages around 0.8%. It may look small, but over 10–15 years the gap becomes huge due to compounding.
Example:
If a fund earns 12% gross return annually, a direct plan could outperform a regular plan by 20–40% over 10 years purely due to lower expenses.
However, switching from regular to direct has tax implications. Roy warns that if capital gains tax is around 15%, an investor may take up to 8 years to break even after switching. This means switching only makes sense when you are committed to holding the same fund for several years.
Many assume that only beginners require regular plans, but Sandy Roy disagrees. Even the best players in the world have coaches — similarly, even seasoned investors benefit from guidance.
A financial advisor does more than assist with paperwork. They help with:
Setting long-term financial goals
Selecting the right funds based on risk tolerance
Monitoring fund manager changes
Rebalancing portfolios over time
Providing updated market insights
And in mutual funds, as Roy points out, a fund is only as good as the fund manager handling it.
| Direct Mutual Funds | Regular Mutual Funds |
|---|---|
| Low cost, no commission | Advisor support included |
| Higher long-term returns | Ideal for beginners |
| Suitable for experienced investors | Helps avoid emotional mistakes |
| DIY research required | Guidance for asset allocation |
There is no one-plan-fits-all answer.
Choose Direct Plan if you can manage your own investments and understand markets.
Choose Regular Plan if you need expert guidance and emotional support during volatility.
In the end, the best plan is the one that you can manage consistently and confidently — because wealth grows not only with returns, but also with discipline, stability, and smart decision-making over time.
