Direct vs Regular Mutual Funds: Which Option Suits New Investors Best? A Complete Guide

Many beginners stepping into the world of investing often feel confused when they first hear about Direct and Regular mutual funds. These two versions of the same mutual fund scheme can deliver different returns, depending on how you invest. For new investors, understanding the difference is essential before making a choice. This article explains what each option means, how they differ, and how beginners can choose the right route using a simple decision formula.

What Are Direct and Regular Mutual Funds?

Mutual funds are offered in two variants—Direct Plans and Regular Plans. While both belong to the same scheme, their costs and returns differ because of the route through which the investor buys them.

1. Regular Mutual Funds

Regular plans are purchased through an intermediary—such as a broker, agent, distributor, or relationship manager. The intermediary guides the investor, recommends schemes, and often assists with transactions and paperwork.

However, this convenience comes at a cost. Regular plans include distribution commissions, which raise their expense ratio. A higher expense ratio means your returns are slightly lower compared to direct plans.

2. Direct Mutual Funds

Direct plans are bought straight from the fund house’s website or through platforms like Groww or Zerodha (Coin), which allow investors to invest without involving an agent.

Because there is no intermediary, no commission is added. As a result, direct plans carry a lower expense ratio and usually deliver higher returns over the long run, sometimes 0.5% to 1% more annually.

Key Differences Between Direct and Regular Plans

Both versions invest in the same portfolio managed by the same fund manager. The only difference lies in costs and convenience.

When Should Beginners Choose a Regular Mutual Fund?

Regular mutual funds are suitable for new investors who prefer expert guidance or are not confident in choosing funds independently. These are ideal for:

• Individuals who have little understanding of mutual funds

• Investors who don’t have the time or interest to conduct their own research

• People managing multiple asset classes and needing professional advice

• Beginners who want hand-holding in asset allocation, rebalancing, and planning

For such investors, paying a small commission is worthwhile because the professional support can prevent costly mistakes.

Who Should Choose Direct Mutual Funds?

Direct plans work best for investors who want to save on commission costs and are comfortable managing their investments independently. This category includes:

• People who understand the basics of mutual fund investing

• Investors already familiar with online platforms like Groww, Zerodha, or Paytm Money

• Individuals willing to compare funds, track performance, and make informed decisions

• Those who prefer using a single digital platform to manage multiple AMCs

For long-term investors, even a marginal difference in returns due to lower expenses can significantly boost wealth creation.

How to Choose Between Direct and Regular Plans: The Simple Formula

Here’s an easy decision-making formula for beginners:

• Choose Regular Plans if:
  You need advice, guided support, or don’t have time to study mutual funds.

• Choose Direct Plans if:
  You can do basic research, invest digitally, and want to maximise long-term returns.

Which Option Is Better Overall?

There is no universally “best” option—your choice depends entirely on your comfort level and investing confidence. Regular plans offer convenience and guidance, while direct plans allow higher returns through cost savings. Beginners often start with regular plans and gradually shift to direct plans once they gain experience.

By understanding the difference between the two, new investors can make informed decisions and build a smarter investment strategy from the very beginning.