Direct Mutual Fund
A Direct Plan of a mutual fund scheme is bought directly from the Asset Management Company (AMC) without going through a distributor or broker. It has a lower expense ratio than the Regular Plan of the same scheme because no commission is paid to a distributor.
Understanding Direct Mutual Fund
SEBI introduced Direct Plans in 2013 to give investors a no-commission alternative to the traditional distributor-led mutual fund channel. Direct Plans have grown to over 50% of total industry AUM, with most institutional and HNI money flowing through this channel.
The expense ratio savings compound dramatically over time. For an equity fund where the Direct Plan is 0.7% cheaper than Regular (0.6% vs 1.3% TER), a ₹1 lakh investment held for 30 years at 12% gross return delivers ₹26 lakh in Direct vs ₹22 lakh in Regular — a ₹4 lakh difference, just from lower fees.
Why it matters
Switching from Regular to Direct Plans is one of the highest-ROI personal finance changes any Indian mutual fund investor can make. The savings are substantial, immediate, and require no risk increase — the underlying portfolio is identical. Use platforms like MF Central, AMFI, or your AMC's website to convert existing Regular folios to Direct.
Example
An ELSS fund's Regular Plan has an expense ratio of 1.5% and Direct Plan 0.6%. On a ₹1.5 lakh annual SIP for 15 years, the Regular Plan ends at approximately ₹70 lakh, while the Direct Plan ends at approximately ₹80 lakh — a ₹10 lakh difference accumulated purely from the fee gap.
An ELSS fund's Regular Plan has an expense ratio of 1.5% and Direct Plan 0.6%. On a ₹1.5 lakh annual SIP for 15 years, the Regular Plan ends at approximately ₹70 lakh, while the Direct Plan ends at approximately ₹80 lakh — a ₹10 lakh difference accumulated purely from the fee gap.