SIP calculator: With this calculation, a SIP of 10,000 will create an additional fund of over 9 lakhs for you..

If you are looking to invest in mutual funds, this update is relevant to you. Certain rules governing mutual funds have been revised. As announced, effective today, November 1, 2026, 'Direct Plans' have become the default option on the apps and websites of mutual fund companies. This means that when you access a digital platform to invest, the 'Direct Plan' will be the first option displayed.

Furthermore, if an investor chooses a 'Regular Plan,' they will be explicitly informed that it entails higher costs (expense ratio) compared to a 'Direct Plan.' The objective is to ensure investors are better informed regarding costs and their investment-related decisions.

Start with a SIP of ₹10,000

If you are planning to invest in mutual funds, starting with a Systematic Investment Plan (SIP) of ₹10,000 can prove highly beneficial in the long run. By investing ₹10,000 every month and selecting the right mutual fund scheme, you could potentially accumulate significant wealth over time. There is a slight difference in costs between 'Direct' and 'Regular' plans, which impacts the returns earned over the long term. According to one calculation, this difference could result in a gain of over ₹9 lakh over 20 years. Let’s explore how this is possible and understand how this calculation works—and how you can leverage it to your advantage.

Understanding through an example

To illustrate this, let’s consider three mutual fund schemes that have different cost structures for their 'Direct' and 'Regular' plans. Suppose an investor invests ₹10,000 per month, and each scheme generates an annual return of 12% (before accounting for costs). In such a scenario, the impact of the difference in expense ratios between the two types of plans becomes clearly visible over investment horizons of 10 and 20 years. Even a marginal difference in costs can lead to a substantial variation in total returns when investing over a long period. For instance, consider the Groww Large Cap Fund: if an individual invests ₹10,000 every month through a SIP for 20 years, the total investment would amount to ₹24 lakh. Based on current projections, this sum could grow to approximately ₹84.53 lakh in a 'Direct' plan, whereas a 'Regular' plan is estimated to yield around ₹75.06 lakh. In other words, due to the difference in costs between the two plans, an investor could potentially gain about ₹9.47 lakh. This clearly demonstrates that opting for a lower-cost plan can be highly advantageous for long-term investments.

Understanding Direct and Regular Mutual Funds

When investing in any mutual fund, it is crucial to pay attention to the associated costs. In both Direct and Regular mutual funds, the capital is invested in the same underlying assets and managed by the same fund manager. The primary difference lies in the costs involved. Direct plans do not incur commissions for distributors or agents, resulting in lower costs. Conversely, Regular plans involve commissions paid to intermediaries, which increases the overall cost. These expenses are deducted from the fund's total assets, which in turn affects the Net Asset Value (NAV) and the returns received by investors.

Which plan is right for whom?

Direct mutual fund plans are a better option for individuals who possess the knowledge to select funds and monitor their own investments. On the other hand, investors who require expert guidance to make investment decisions may prefer Regular plans. New SEBI regulations will not lead to the discontinuation of Regular plans, nor will existing investments be automatically converted into Direct plans. Investors are free to choose either plan based on their individual needs and convenience.

Investors should also be aware that the 'base expense ratio' does not represent the entirety of the costs associated with a mutual fund. Before starting an SIP, be sure to compare the costs of mutual funds, as these impact your returns over the long term.

Disclaimer: This content has been sourced and edited from Money Control. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.