What is Direct Plan in Mutual Funds?

What is Direct Plan in Mutual Fund-Meaning-Examples-Features-characteristics-Advantages-Benefits-Disadvantages-Limitations-iBizMoney

To purchase a direct plan in mutual fund, you deal directly with the mutual fund (usually from their own website). In contrast, you can acquire a Regular plan by contacting a financial consultant, broker, or distributor (intermediary). Brokers typically receive a commission from the mutual fund firm in the case of a standard plan. The expense of this is then cover by the plan. The expenditure ratio, a phrase for mutual funds, is higher for a traditional plan. Continue reading to find out the differences between traditional mutual funds and direct investment options. Let us look at what is direct plan in mutual funds with examples in this section.

You should also allocate extra time to monitoring your investments and adjusting your strategy as needed. You should consult a financial professional if you need assistance determining your risk tolerance, allocating your funds, or selecting the best mutual fund scheme to invest in. When it comes to the stock market, investors’ levels of expertise vary widely. To make the greatest decision for your financial future, you should be aware of the benefits and drawbacks of both regular and direct plan in mutual funds programmes. You can also read about what is SIP in mutual fund for your additional knowledge.

What is Direct Plan in Mutual Funds?

Direct Mutual Funds are mutual funds that are sold and distributed directly by the asset management company (AMC) or fund house. That is to say, there is no need for intermediaries such as wholesalers or retailers. Since there are no middlemen involved, there are no associated commissions or brokerage fees. Therefore, the expense ratio of a direct mutual fund is lower.

As a result, the rate of return increases as a result of the decreased outlay of resources. The direct plan of a mutual fund can be identified by the prefix “Direct,” which is appended to the fund’s official name. These mutual funds are available for purchase both online and in person.

Direct Mutual Fund Vs Regular Mutual Fund

There are certain key distinctions between the direct plan and the standard plan that you should be aware of. The conventional mutual fund is compared to its direct counterpart, and its key distinctions are outlined below. Take a look.


We have discussed the TER disparity between traditional and direct mutual funds. The commission structure of each AMC and scheme determines the TER differential between regular plans and direct plans.

Commissions on equity funds, for instance, are typically higher than those on various types of debt funds, such as overnight funds, liquid funds, etc. Variation in TERs between traditional and direct plans can range from 0.5 percentage points to 1 percentage point.

The returns from standard and direct plans are directly impacted by this. For example, if the TER of the regular plan is 0.75% more than that of the direct plan. The direct plan will provide a 1% higher CAGR return. Over the long term, direct mutual fund plans can provide a substantially higher rate of return compared to traditional plans.

Net Asset Value (NAV)

Changing the TER of a mutual fund plan requires access to the NAV. Considering that direct plans’ TERs are lower than those of regular plans’, direct plans’ NAVs are also higher. If you invest in a direct plan instead of a traditional plan, the value of your money will increase over time.

Role of a Financial Advisor

DIY investors who are comfortable purchasing and selling mutual funds on their own can take advantage of direct investment plans. Direct plan investors now have more options for how and where to put their money thanks to online investment platforms of AMCs and RTAs and transactions via mobile apps.

Financial advisors do more than just assist with transactions, though. They also aid in the management of investment portfolios and the making of investment decisions (such as whether to put money into equity, debt, or hybrid funds, which scheme to put money into, when to sell, etc.).

What is Better – a Regular or Direct Plan in Mutual Funds?

Similar to how the same mutual fund scheme can be use in both Direct and Regular programmes. This fund is manage by the same expert who oversees the other one, and it contains the same assortment of equities and bonds.

The primary distinction between regular and direct plan in mutual funds is that the latter do not require the AMC to pay a commission to the broker in the form of transaction fees or distribution costs. This is due to the fact that investing via a direct plan eliminates the need for a go-between and the associated fees. Thus, the expenditure ratio of direct plans is smaller.

A direct plan’s NAV is higher than that of a standard plan. Could this be interpreted to suggest that direct plan in mutual funds are the best option for investors? Investment decisions should take into account more than just NAV.

You should also consider whether or not you have the financial literacy to select the most suitable fund for your needs and the best methods for maintaining a healthy portfolio. If not, it is recommend that you employ a consultant that can complete all of these tasks at a reasonable price. The advisor regularly monitors the portfolio and re-balances it to achieve higher returns, so the higher costs of ordinary funds are offset.

Who Should Invest in Direct Mutual Fund Plans?

Direct plans are an option for those who would prefer to avoid intermediaries and deal directly with fund firms. Investors who are comfortable and confident conducting their own analysis of mutual funds can benefit greatly from direct funds.

The investor is responsible for handling all aspects of the investment process. Those who have a lot of experience with mutual funds and are looking to maximize their returns while minimizing costs can consider purchasing direct funds.


In this post, we compared regular and direct plan in mutual fund ones, covering their key differences as well as their advantages and disadvantages for investors. A direct plan can cost less and return more than a regular plan. The disparity in returns might be substantial over the course of a long investment period. Direct mutual fund plans, on the other hand, require knowledge and experience in order to invest in. Your financial interests may be jeopardize if you make poor investment decisions.

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