Both the regular and direct versions of any mutual fund are the exact same fund, run by the same fund managers investing in the same stocks and bonds.

The difference is that in the case of direct mutual funds, there is no broker/distributor commission. Which means, as an investor, you get higher returns from the exact same mutual fund.

Low-cost direct mutual funds are slowly gaining popularity, especially among HNIs and corporate investors. However, many small investors are still stuck with high-cost regular plans. This is largely due to lack of awareness.

Even those who know that direct plans are cheaper when compared to regular plans often do not switch to direct as they are unaware of the extent to which a direct plan can increase their returns.

See for yourself in this article how the five-year returns of direct plans are significantly higher when compared to the regular plans.

The difference in Returns: Direct vs Regular

Direct plans of any mutual fund always give higher returns than their regular counterparts. Moreover, the higher returns keep compounding. That higher amount itself earns returns, and so on, over the years.

Here’s a comparison between the returns from the direct and regular plan of 10 mutual funds.

For simplicity, I have taken an initial investment amount of ₹ 10,00,000 (lump sum) in all examples.

1. SBI Bluechip Fund

This is a Large Cap Equity Oriented Mutual Fund launched on February 14, 2006. It is a fund with moderately high risk and has given a return of 11.79% (regular plan) since its launch.

The difference in returns from a direct and regular plan of this fund

DirectRegularDifference
Initial investment amount₹ 10,00,000₹ 10,00,0000
Investment tenure5 years5 years0
Avg. 5 Year Return20.34 %19.24 %1.1 %
Final return amount₹ 25,23,771.53₹ 24,10,515₹ 1,13,256.53

As seen from the above table, there is a difference of ₹ 1,13,256.53 between returns from the direct and regular plan of this fund, with an initial investment amount of ₹ 10,00,000 for 5 years.

2. Reliance Top 200 Fund

This is a Large Cap Equity Oriented Mutual Fund launched on August 08, 2007. It is a fund with moderately high risk and has given a return of 11.89% (regular plan) since its launch.

The difference in returns from a direct and regular plan of this fund

DirectRegularDifference
Initial investment amount₹ 10,00,000₹ 10,00,0000
Investment tenure5 years5 years0
Avg. 5 Year Return19.69 %18.63 %1.06 %
Final return amount₹ 24,56,344.84₹ 23,49,484.87₹ 1,06,859.97

As seen from the above table, there is a difference of ₹1,06,859.97 between returns from the direct and regular plan of this fund, with an initial investment amount of ₹ 10,00,000 for 5 years.

3. L&T Midcap Fund

This is a Mid Cap Equity Oriented Mutual Fund launched on August 09, 2004. It is a fund with high risk and has given a return of 21.64% (regular plan) since its launch.

Difference in returns from direct and regular plan of this fund

 DirectRegularDifference
Initial investment amount₹ 10,00,000₹ 10,00,0000
Investment tenure5 years5 years0
Avg. 5 Year Return 31.99 %30.92 %1.07 %
Final return amount₹ 40,05,946.5₹ 38,46,183.35₹ 1,59,763.15

As seen from above table, there is a difference of ₹1,59,763.15 between returns from the direct and regular plan of this fund, with an initial investment amount of ₹10,00,000 for 5 years.

4. Aditya Birla Sun Life Small & Midcap Fund

This is a Mid Cap Equity Oriented Mutual Fund launched on May 31, 2007. It is a fund with high risk and has given a return of 14.05% (regular plan) since its launch.

Difference in returns from direct and regular plan of this fund

DirectRegularDifference
Initial investment amount₹ 10,00,000₹ 10,00,0000
Investment tenure5 years5 years0
Avg. 5 Year Return30.14 %28.94 %1.2 %
Final return amount₹ 37,32,965.81₹ 35,64,005.21₹ 1,68,960.6

As seen from above table, there is a difference of ₹1,68,960.6 between returns from a direct and regular plan of this fund, with an initial investment amount of ₹10,00,000 for 5 years.

5. HDFC Small Cap Fund

This is a Small Cap Equity Oriented Mutual Fund launched on April 03, 2008. It is a fund with high risk and has given a return of 16.57% since its launch.

Difference in returns from direct and regular plan of this fund

DirectRegularDifference
Initial investment amount₹ 10,00,000₹ 10,00,0000
Investment tenure5 years5 years0
Avg. 5 Year Return27.11 %25.79 %1.32 %
Final return amount₹ 33,18,169.71₹ 31,49,420.04₹ 1,68,749.67

As seen from above table, there is a difference of ₹1,68,749.67 between returns from the direct and regular plan of this fund, with an initial investment amount of ₹10,00,000 for 5 years.

6. L&T Emerging Businesses Fund

This is a Small Cap Equity Oriented Mutual Fund launched on May 12, 2014. It is a fund with high risk and has given a return of 30.35 % (regular plan) since its launch.

Difference in returns from direct and regular plan of this fund

DirectRegularDifference
Initial investment amount₹ 10,00,000₹ 10,00,0000
Investment tenure3 years3 years0
Avg. 3 Year Return25.21 %24.3 %0.91 %
Final return amount₹ 19,62,985.3₹ 19,20,495.91₹ 42,489.4

As seen from above table, there is a difference of ₹42,489.4 between returns from a direct and regular plan of this fund, with the initial investment amount of ₹10,00,000 for 3 years.

7. DSP BlackRock Opportunities Fund

This is a  Multi-Cap Equity Oriented Mutual Fund launched on May 16, 2000. It is a fund with moderately high risk and has given a return of 18.80% (regular plan) since its launch.

Difference in returns from direct and regular plan of this fund

DirectRegularDifference
Initial investment amount₹ 10,00,000₹ 10,00,0000
Investment tenure5 years5 years0
Avg. 5 Year Return21.93 %20.99 %0.94 %
Final return amount₹ 26,94,963.39₹ 25,92,670.85₹ 1,02,292.54

As seen from above table, there is a difference of ₹1,02,292.54 between returns from the direct and regular plan of this fund, with an initial investment amount of ₹10,00,000 for 5 years.

8. Aditya Birla Sun Life Tax Relief 96

This is an Open Ended ELSS fund with a lock-in of 3 years and launched on March 06, 2008. It is a fund with moderately high risk and has given a return of 25.59% (regular plan) since its launch.

Difference in returns from direct and regular plan of this fund

DirectRegularDifference
Initial investment amount₹ 10,00,000₹ 10,00,0000
Investment tenure5 years5 years0
Avg. 5 Year Return24.8623.771.09
Final return amount₹ 30,34,706.21₹ 29,04,537.28₹ 1,30,168.93

As seen from above table, there is a difference of ₹1,30,168.93 between returns from the direct and regular plan of this fund, with an initial investment amount of ₹10,00,000 for 5 years.

9. UTI Transportation and Logistics Fund 

This is a Sector Equity Oriented Mutual Fund launched on March 9, 2004. It is a fund with high risk and has given a return of 19.80% (regular plan) since its launch.

Difference in returns from direct and regular plan of this fund

DirectRegularDifference
Initial investment amount₹ 10,00,000₹ 10,00,0000
Investment tenure5 years5 years0
Avg. 5 Year Return35.3 %33.94 %1.36 %
Final return amount₹ 45,34,077.96₹ 43,10,736.47₹ 2,23,341.49

As seen from above table, there is a difference of ₹2,23,341.49 between returns from the direct and regular plan of this fund, with an initial investment amount of ₹10,00,000 for 5 years.

10. Reliance Regular Savings Fund – Balanced 

This is a Hybrid Equity Oriented Mutual Fund launched on June 08, 2005. It is a fund with moderately high risk and has given a return of 14.15% (regular plan) since its launch.

Difference in returns from direct and regular plan of this fund

 DirectRegularDifference
Initial investment amount₹ 10,00,000₹ 10,00,0000
Investment tenure5 years5 years0
Avg. 5 Year Return19.32 %17.98 %1.34 %
Final return amount₹ 2418612.12₹ 2285819.64₹ 132792.48

As seen from above table, there is a difference of ₹1,32,792.48 between returns from the direct and regular plan of this fund, with an initial investment amount of ₹10,00,000 for 5 years.

Conclusion

Everyone should go with direct mutual funds as the returns offered by the direct plan of a mutual fund will always be higher than the regular plan of the same mutual funds as seen from the above comparison of 10 mutual funds.

There would not be any distribution fees or trail fees paid to mutual fund brokers for such mutual fund schemes. Due to this, the expense ratio would be lower when compared to regular plans.

Investors would get higher returns compared to regular plans. The returns would be higher by around 1% per annum for 5 years of investment tenure, as seen from the above comparison of the top 10 funds.

To look at some of the best performing funds from every category of mutual funds, check out Groww 30 best mutual funds to invest in 2018.

Happy Investing!

Disclaimer: the views expressed here are of the author and do not reflect those of Groww. 

Mutual Fund Calculator

SIP CalculatorPPF CalculatorEMI Calculator
Lumpsum CalculatorPF CalculatorCar Loan EMI Calculator
Mutual Fund Return CalculatorGratuity CalculatorPersonal Loan EMI Calculator
SWP CalculatorHRA CalculatorHome Loan EMI Calculator
Sukanya Samriddhi Yojana CalculatorCAGR CalculatorSBI EMI Calculator
FD CalculatorGST CalculatorSBI Personal Loan EMI Calculator 
RD CalculatorHDFC EMI CalculatorSBI Home Loan EMI Calculator
NPS CalculatorHDFC Personal Loan EMI CalculatorSBI PPF Calculator
Simple Interest CalculatorHDFC Home Loan EMI CalculatorSBI RD Calculator
Compound Interest CalculatorHDFC FD CalculatorSBI SIP Calculator
Interest Rate CalculatorHDFC RD CalculatorSBI FD Calculator