Mutual Fund Direct vs Regular: Which Route is Right For You?

What is a Direct Plan in Mutual Funds?

A direct mutual fund plan lets you invest directly with the Asset Management Company (AMC), without a distributor, broker, or advisor. As there is no intermediary involved, direct and regular mutual fund plans mainly differ in cost. You can invest through —

• AMC websites or apps
• Registered online investment platforms
• SEBI-registered investment advisors (fee-only)

Why Direct Plans Cost Less

Since no intermediary is involved, the AMC does not pay any commission. As a result —

• The expense ratio is lower
• The NAV (Net Asset Value) is higher
• Regular fund vs direct fund returns favour direct plans over the long term

Who Should Choose Direct Plans?

Direct plans work best if you —

• Understand how mutual funds work
• Can research and compare schemes
• Are comfortable tracking and rebalancing your portfolio
• Prefer full control over decisions

Example: Two investors put AED 100,000 into the same equity fund, one via mutual fund direct vs regular. The direct investor could earn 0.5%–1% higher CAGR over the long term purely due to lower costs.

That difference compounds significantly over 10–20 years.

What is a Regular Plan in Mutual Funds?

A regular plan is purchased through a mutual fund distributor (MFD) or broker. The distributor:

• Helps you select suitable funds
• Assists with KYC and paperwork
• Monitors your portfolio
• Provides periodic reviews and advice

In return, the AMC pays a commission, making regular mutual fund costs slightly higher.

Why Regular Plans Cost More

The distributor’s commission is embedded in:

• Total Expense Ratio (TER)
• Adjusted daily from the NAV

This makes regular plans slightly more expensive, resulting in marginally lower returns compared to direct plans of the same scheme.

Who Should Choose Regular Plans?

Regular plans are useful if you:

• Are new to mutual fund investing
• Prefer professional guidance
• Want help aligning investments with goals
• Value convenience and behavioural support

For many investors, discipline and consistency matter more than saving 0.5% in cost. This is where regular plans add value.

Let’s start with the difference between regular and direct mutual fund to help you make easy decisions —

Direct vs Regular Mutual Fund Plans: Quick Summary

Here’s the difference between regular and direct mutual fund based on different categories —

Mutual Fund Direct vs Regular: Detailed Comparison (What Actually Changes for Investors)

While direct and regular mutual fund plans invest in the same underlying portfolio, the experience, cost structure, and long-term impact can differ meaningfully. 

Let’s compare direct vs regular mutual fund plans and go beyond surface-level differences.

1. Investment Route & Control

• Direct Plan: You invest directly with the AMC via its app, website, or a registered online platform. You control fund selection, timing, monitoring, and rebalancing.
• Regular Plan: You invest through a Mutual Fund Distributor (MFD) or broker who facilitates transactions and provides ongoing guidance.

What this means for you: Direct plans suit self-driven investors, while regular plans suit those who prefer assisted decision-making.

2. Expense Ratio (Cost Impact Over Time)

• Direct Plan: Lower Total Expense Ratio (TER) because there are no distributor commissions
• Regular Plan: Higher TER as it includes ongoing commissions paid to the distributor

Why this matters: A TER difference of 0.5%–1% annually may seem small. But over 15–20 years, it can reduce the final corpus by thousands of Dirhams, depending on investment size.

3. Net Asset Value (NAV)

• Direct Plan: NAV is typically higher, reflecting lower costs
• Regular Plan: NAV is slightly lower due to higher expense ratios

Important clarity: The NAV difference is cost-driven, not performance-driven. Both plans are managed identically.

4. Returns Potential

• Direct Plan: Higher long-term returns due to lower expenses
• Regular Plan: Slightly lower returns, offset by advisory support

Example: If two UAE-based NRIs invest AED 200,000 in the same equity fund for 15 years —

• Direct plan investor may earn 0.75% higher CAGR
• This can translate into a significantly higher maturity value over time

5. Guidance & Advisory Support

• Direct Plan: No advisory support. You are responsible for:
  • Fund research
  • Asset allocation
  • Risk management
  • Portfolio reviews
     
• Regular Plan: Distributor helps with:
  • Scheme selection based on goals
  • Portfolio reviews
  • Market volatility guidance
  • Behavioural discipline

For many investors, avoiding panic-driven exits is more valuable than cost savings.

6. Convenience & Ongoing Support

• Direct Plan: All actions — KYC updates, switches, redemptions—are self-managed
• Regular Plan: Distributor assists with documentation, updates, and service requests

This is particularly useful for busy professionals and expats in the UAE managing cross-border finances.

7. Suitability Based on Investor Profile

The Role of a Mutual Fund Distributor (MFD)

A good MFD does more than execute transactions. They help with:

• Understanding risk profile
• Goal-based investing (retirement, education, home)
• Portfolio diversification
• Periodic rebalancing
• Emotional discipline during market volatility

For many investors, avoiding wrong decisions matters more than saving on commissions.

Direct Plans vs Regular Plans: Which One Should You Choose?

Choose a Direct Plan If

• You’re confident analysing funds
• You track performance regularly
• You’re cost-sensitive
• You enjoy managing investments

Choose a Regular Plan If

• You’re new to mutual funds
• You want structured advice
• You prefer goal-based planning
• You value convenience and accountability

There’s no universally correct choice, only what aligns with your investing behaviour.

Can You Switch from Regular to Direct Plans?

Yes, you can switch between direct and regular mutual fund. However, it’s usually treated as redemption from regular plan and fresh investment into direct plan. Before switching, it’s better to check —

• Exit load (if applicable)
• Capital gains tax implications
• Long-term cost-benefit

Switching makes sense only if you’re confident in managing investments independently going forward.

Choose the Right Mutual Fund Route with Policybazaar.ae

The key of choosing between direct and regular mutual funds is deciding what aligns with your financial goals, experience, and time availability.

👉 At Policybazaar.ae, you can:

• Compare investment options in UAE transparently
• Understand cost differences clearly
• Get guidance tailored for UAE residents and NRIs
• Align investments with long-term goals like retirement, children’s education, or wealth creation

Don’t choose between direct and regular mutual fund plans blindly. Choose what fits your financial journey with clarity, not confusion.

Final Thoughts: Mutual Fund Direct vs Regular Plans What Fits

Direct plans offer cost efficiency and control.

Regular plans offer guidance and discipline.

If you have knowledge and time, direct plans can boost returns. If you need support and structure, regular plans can help you stay invested long-term, which often matters more. The best plan is the one you can stick with consistently.

Disclaimer: Mutual fund investments are subject to market risks. Read all scheme-related documents carefully. This article is for educational purposes only and does not constitute investment advice.

FAQs: Direct Plans vs Regular Plans in Mutual Funds