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 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.

Read More: Direct Plans Vs Regular Plans in Mutual Funds: Which Plan is Better for You?

Low-cost direct mutual funds are slowly gaining popularity, especially among HNIs and corporate investors. However, many small investors are still stuck with the 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.

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 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.

Difference in returns from direct and regular plan of this fund

Direct Regular Difference
Initial investment amount ₹ 10,00,000 ₹ 10,00,000 0
Investment tenure 5 years 5 years 0
Avg. 5 Year Return 20.34 % 19.24 % 1.1 %
Final return amount ₹ 25,23,771.53 ₹ 24,10,515 ₹ 1,13,256.53

As seen from 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.

Difference in returns from direct and regular plan of this fund

Direct Regular Difference
Initial investment amount ₹ 10,00,000 ₹ 10,00,000 0
Investment tenure 5 years 5 years 0
Avg. 5 Year Return 19.69 % 18.63 % 1.06 %
Final return amount ₹ 24,56,344.84 ₹ 23,49,484.87 ₹ 1,06,859.97

As seen from 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

  Direct Regular Difference
Initial investment amount ₹ 10,00,000 ₹ 10,00,000 0
Investment tenure 5 years 5 years 0
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

Direct Regular Difference
Initial investment amount ₹ 10,00,000 ₹ 10,00,000 0
Investment tenure 5 years 5 years 0
Avg. 5 Year Return 30.14 % 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

Direct Regular Difference
Initial investment amount ₹ 10,00,000 ₹ 10,00,000 0
Investment tenure 5 years 5 years 0
Avg. 5 Year Return 27.11 % 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

Direct Regular Difference
Initial investment amount ₹ 10,00,000 ₹ 10,00,000 0
Investment tenure 3 years 3 years 0
Avg. 3 Year Return 25.21 % 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

Direct Regular Difference
Initial investment amount ₹ 10,00,000 ₹ 10,00,000 0
Investment tenure 5 years 5 years 0
Avg. 5 Year Return 21.93 % 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

Direct Regular Difference
Initial investment amount ₹ 10,00,000 ₹ 10,00,000 0
Investment tenure 5 years 5 years 0
Avg. 5 Year Return 24.86 23.77 1.09
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

Direct Regular Difference
Initial investment amount ₹ 10,00,000 ₹ 10,00,000 0
Investment tenure 5 years 5 years 0
Avg. 5 Year Return 35.3 % 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

  Direct Regular Difference
Initial investment amount ₹ 10,00,000 ₹ 10,00,000 0
Investment tenure 5 years 5 years 0
Avg. 5 Year Return 19.32 % 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 investment tenure, as seen from the above comparison of 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.