Same fund, same manager, two different prices

The rule. Every mutual fund has to offer two plans of each scheme. A regular plan pays commission to whoever sold it to you. A direct plan does not.

What is identical. The portfolio, the fund manager, the strategy, the risk. Nothing about the investing changes.

What differs. The expense ratio. The regular plan carries the commission, so it charges more every year, and its NAV drifts below the direct plan’s over time.

A rupee example. On ₹1,00,000 held for a year, a difference of one percentage point in expense ratio is about ₹1,000. That sounds small. Over decades it compounds against you in exactly the way returns compound for you.

When regular is the right choice. If you genuinely use an adviser or distributor and value that help, the regular plan is what pays for it. That is a fair trade.

The thing to avoid is holding a regular plan while receiving no advice at all, which is the position a lot of people are in without realising there was a choice.

How to tell which one you hold. Look at the scheme name on your statement. It will say Direct or Regular, usually right after the fund name. Your consolidated account statement shows it for every holding you have.

Switching is not free. Moving from regular to direct is treated as a redemption and a fresh purchase, so an exit load can apply if you are inside the scheme’s window, and capital gains tax applies on the way out. Whether the switch is worth it depends on how long you plan to hold from here.

The honest version of the trade. A distributor who actually helps you choose sensibly, and talks you out of selling in a crash, may well earn their commission several times over. The problem is paying that commission every year to someone you have never spoken to.

This is general education, not financial advice. Figures are as reported by the source and may change.