Have you ever thought about how much money you lose by choosing regular mutual fund plans over direct plans because of their higher expense ratio? We often hear that direct plans deliver better returns than regular plans, yet most of us don’t fully understand the significance of this difference.
To find this, we analysed how Rs 1 lakh one-time investments and Rs 10,000 monthly SIPs (systematic investment plans) have grown over 10 years in direct vs regular plans of the country’s top five equity mutual funds. But before that, let’s understand the basic difference between direct and regular funds.
What are regular mutual fund plans?
A regular plan is the same fund, but you buy it through a distributor or agent. The fund house pays a commission to these intermediaries, and this commission is included in the expense ratio. Therefore, regular plans have higher expenses — slightly higher fees are deducted each year, and the NAV grows a bit more slowly.
In simple terms, the investor pays a slightly higher expense in exchange for advice and convenience.
What are direct mutual fund plans?
In a direct plan, the investor buys the fund directly from the fund house. There are no agents or middlemen, so there are no commissions. This means a lower expense ratio, slightly faster NAV growth, and higher returns over the long term. The fund is the same, the portfolio is the same — just the expenses are lower. And this is what makes the biggest difference in the long run.
So why are the returns different?
Both plans (direct and regular) have the same fund manager, the same stocks, and the same strategy. The only difference lies in the annual expense. Direct plan expenses are usually 0.5% to 1% lower than fees charged on regular schemes.
This difference seems small in the first year, but over 10 years, this small difference compounds and can create a large corpus gap.
This is why Rs 1 lakh invested in a direct plan can turn into a comparatively much larger sum in 10 years than in a regular plan.
Here are the top five equity funds (based on 10-year CAGR), their expense ratios, and the difference in the lump sum and SIP corpus over 10 years.
1. Nippon India Small Cap Fund
Nippon India Small Cap Fund — Direct vs Regular Plan (10-Year Comparison):
| Parameter | Direct Plan | Regular Plan |
| Expense Ratio | 0.63% | 1.39% |
| 10-Year Annualised Return (Lump Sum) | 21.40% | 20.26% |
| Value of Rs 1 Lakh Lump Sum After 10 Years | Rs 7 lakh | Rs 6.39 lakh |
| 10-Year SIP Annualised Return | 23.66% | 22.59% |
| Value of Rs 10,000 Monthly SIP (10 Years) | Rs 41.96 lakh | Rs 39.59 lakh |
(Source: AMFI, Value Research)
2. Axis Small Cap Fund
Axis Small Cap Fund — Direct vs Regular Plan (10-Year Comparison):
| Parameter | Direct Plan | Regular Plan |
| Expense Ratio | 0.56% | 1.59% |
| 10-Year Annualised Return (Lump Sum) | 20% | 18.50% |
| Value of Rs 1 Lakh Lump Sum After 10 Years | Rs 6.24 lakh | Rs 5.5 lakh |
| 10-Year SIP Annualised Return | 21.80% | 20.27% |
| Value of Rs 10,000 Monthly SIP (10 Years) | Rs 37.94 lakh | Rs 34.92 lakh |
(Source: AMFI, Value Research)
3. Edelweiss Mid Cap Fund
Edelweiss Mid Cap Fund — Direct vs Regular Plan (10-Year Comparison):
| Parameter | Direct Plan | Regular Plan |
| Expense Ratio | 0.40% | 1.68% |
| 10-Year Annualised Return (Lump Sum) | 19.94% | 18.43% |
| Value of Rs 1 Lakh Lump Sum After 10 Years | Rs 6.2 lakh | Rs 5.46 lakh |
| 10-Year SIP Annualised Return | 22.96% | 21.31% |
| Value of Rs 10,000 Monthly SIP (10 Years) | Rs 40.39 lakh | Rs 36.95 lakh |
(Source: AMFI, Value Research)
4. HDFC Small Cap Fund
HDFC Small Cap Fund — Direct vs Regular Plan (10-Year Comparison):
| Parameter | Direct Plan | Regular Plan |
| Expense Ratio | 0.67% | 1.54% |
| 10-Year Annualised Return (Lump Sum) | 19.57% | 18.29% |
| Value of Rs 1 Lakh Lump Sum After 10 Years | Rs 6 lakh | Rs 5.4 lakh |
| 10-Year SIP Annualised Return | 21.13% | 19.95% |
| Value of Rs 10,000 Monthly SIP (10 Years) | Rs 36.30 lakh | Rs 34.33 lakh |
(Source: AMFI, Value Research)
5. Kotak Midcap Fund
Kotak Midcap Fund — Direct vs Regular Plan (10-Year Comparison):
| Parameter | Direct Plan | Regular Plan |
| Expense Ratio | 0.37% | 1.38% |
| 10-Year Annualised Return (Lump Sum) | 19.54% | 18.07% |
| Value of Rs 1 Lakh Lump Sum After 10 Years | Rs 5.98 lakh | Rs 5.3 lakh |
| 10-Year SIP Annualised Return | 21.26% | 19.85% |
| Value of Rs 10,000 Monthly SIP (10 Years) | Rs 36.82 lakh | Rs 34.14 lakh |
(Source: AMFI, Value Research)
Across all five mutual funds, one pattern is very clear — over 10 years, this extra expense ratio quietly eats into returns. For example, a Rs 1 lakh lump sum grows to around Rs 6–7 lakh in direct plans, but only Rs 5.3–6.4 lakh in regular plans.
Similarly, a Rs 10,000 SIP grows to Rs 36–42 lakh in direct plans, while the same SIP in regular plans becomes only Rs 34–39 lakh. The gap may look small each year, but over a decade, it compounds into a loss of Rs 2–4 lakh or more.
These five funds clearly show that lower-cost direct plans help long-term investors build significantly higher wealth simply by avoiding unnecessary expenses.
So why do investors still choose regular plans?
This question arises — when direct plans are cheaper and offer higher returns, why do so many investors choose regular plans?
The truth is, not every investor is a DIY investor. Many people want advice, trust, and consistent guidance in investing. Regular plans are popular because they provide advice and handholding, such as guidance on which funds are best, how long to invest, and when to make changes.
They also offer convenience, as many find it easier to talk to an agent or distributor. Having an expert available to help prevent panicked decisions during market crashes makes many investors feel secure. Therefore, many people find it preferable to pay a little extra for convenience and trust.
Conclusion: Who should choose which plan?
Finally, it’s important to understand that both plans are designed for different types of investors.
Direct plans are ideal for those who want to keep expenses low, can conduct their own research, are comfortable investing digitally, and can track their investments over the long term. Direct plans offer higher returns in the long run due to cost savings.
Regular plans are a good choice for those who want advice, prefer guidance in investment decisions, and want to make decisions with someone’s help during market fluctuations. Regular plans have higher expenses, but they offer comfort and guidance.
Investors should understand what they are paying for — the benefit of lower expenses and higher returns, or the support of advice and convenience. The right plan is the one that best suits your needs, your knowledge, and your investing behavior.
Disclaimer: The above content is for informational purposes only. Mutual Fund investments are subject to market risks. Please consult your financial advisor before investing.
