Two people buy the same mutual fund on the same day. Same manager, same stocks, same market. Thirty years later one of them has about ₹66 lakh less. The only difference is the plan they chose: regular vs direct plan.
This is the quietest cost in personal finance. It is charged every year, on your whole balance, whether the fund rises or falls. You never write a cheque for it, which is exactly why it works.
What the expense ratio is
Every mutual fund deducts a yearly fee from your money, called the expense ratio or total expense ratio. You never see it leave. It is taken out of the fund's value each day, so the return you see is already after the fee.
A regular plan is sold through a distributor, and part of the fee pays the distributor's commission. A direct plan is bought straight from the fund house, with no commission, so its fee is lower. The portfolio is identical.
Regular vs direct plan: how big the gap is
In AMFI's expense data for 31 March 2026, as reported in The Last Salary, the median Nifty 50 index fund in a direct plan charged 0.18% a year. The median actively managed equity fund in a regular plan charged 1.93% a year.
SEBI also changed the rules from 1 April 2026. The cap on an equity fund's base expense ratio now runs from 2.10% for the smallest funds down to 0.95% for the largest. GST and other statutory levies are now charged on top of the cap rather than inside it.
What the fee costs over time
Here is one investor, ₹10,000 a month, an assumed 12% a year before fees. The only thing that changes is the fee: 0.20% for a low-cost direct option, 1.50% for a regular plan.
| After | Low-cost (0.20%) | Regular (1.50%) | Extra lost to fee | Share of corpus |
|---|---|---|---|---|
| 10 years | ₹22.0 lakh | ₹20.5 lakh | ₹1.4 lakh | 7% |
| 20 years | ₹89.0 lakh | ₹76.2 lakh | ₹12.8 lakh | 14% |
| 30 years | ₹2.93 crore | ₹2.27 crore | ₹66.1 lakh | 23% |
You invest ₹36 lakh in both cases. After thirty years, the regular plan leaves you ₹66 lakh poorer, close to a quarter of the corpus. At the AMFI medians of 0.18% and 1.93%, the gap is larger still: about ₹85 lakh, or 29%.
The fee compounds against you exactly the way returns compound for you. That is why the gap is small at ten years and large at thirty.
Is the regular plan ever worth it?
A good adviser can be worth paying. Help that keeps you invested in a crash, or stops a bad decision, has real value. The question is whether you are paying for advice you actually receive, and whether you know what it costs.
If you do not know which plan you hold, check your account statement. Direct plans have "Direct" in the scheme name.
How to apply this
- Find out what you hold. Look for "Direct" or "Regular" in each scheme name on your statement.
- Find the expense ratio. Every fund house publishes it on its website, scheme by scheme.
- Run your own numbers. Use the SIP fee calculator with your SIP amount and your fund's fee.
- Think before switching. Moving from regular to direct is a sale and a fresh purchase, so it can trigger capital gains tax and exit loads. Check both first, or ask a fee-only adviser.
The fee is only half of it
A lower fee builds a bigger corpus. It is still a corpus. It pays you nothing until you start selling it, and selling it in retirement brings its own risks. That is the other half of the argument, and it is set out on the main page and in Chapter 4.
A crash takes your money loudly, once. The fee takes it quietly, every year.
Frequently asked questions
What is the difference between a regular and a direct plan?
They hold the same portfolio. A regular plan's fee includes a distributor's commission. A direct plan is bought from the fund house with no commission, so its fee is lower.
How much does a regular plan cost compared with a direct plan?
On a ₹10,000 monthly SIP at an assumed 12% for 30 years, a 1.5% fee instead of 0.2% costs about ₹66 lakh, roughly 23% of the final corpus.
What changed in mutual fund expense ratios in April 2026?
SEBI's new framework capped the base expense ratio of equity schemes at 2.10% for the smallest funds and 0.95% for the largest, with GST and statutory levies charged on top.
Should I switch from a regular plan to a direct plan?
It can lower your costs, but switching is a redemption and a new purchase, which may trigger tax and exit loads. Check both first, or ask a fee-only adviser.
How do I know if my mutual fund is direct or regular?
The scheme name on your account statement says "Direct" or "Regular".
Disclaimer: This article is for education only and is not financial advice. Please consult a certified financial expert before making investment decisions.
