Direct vs Regular Fund Calculator
1,10,80,735
96,29,232
14,51,502(13.1%)
Direct Plan vs Regular Plan Wealth Growth
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Commission Drag Formula
Measures wealth enhancement from avoiding the 1% p.a. average distributor commission charged in regular mutual fund plans.
Worked Example: ₹10,000 monthly SIP for 20 years at 12% returns vs 11% regular returns (1% commission savings)
Direct Plans: The ₹10 Lakh Commission Leak Salaried Indians Ignore
Deepak bought his mutual funds through a bank agent. "The advice is free," the agent told him. Deepak felt he was getting a great deal. Ten years later, Deepak compared his regular plan returns against direct plans.
He had been investing ₹10,000/month via SIP. Over 20 years at 12% returns, his regular plan grew to ₹89.3 Lakhs. Had he invested in the direct plan of the exact same fund (earning 12% instead of 11% regular due to no agent commissions), his corpus would have been ₹99.9 Lakhs. Deepak paid ₹10.6 Lakhs in commissions to his agent.
Regular mutual funds carry a distributor commission (typically 0.5% to 1.5% p.a.) built directly into the expense ratio. Direct plans have zero commission. This fee drag is charged every single year on your entire accumulated portfolio value.
Switch to Direct plans. Almost all online investment platforms now offer direct plans for free. If you need financial advice, hire a flat-fee registered advisor rather than paying compounding commissions to a distributor.
Frequently Asked Questions
What is the difference between Direct and Regular plans?
Direct plans are bought directly from the mutual fund house and have lower fees. Regular plans are bought through distributors or agents, carrying higher fees to pay for commissions.
How much commission do regular plans charge?
Commissions range from 0.5% to 1.5% of your total portfolio value per year. This fee is charged annually on your entire accumulated wealth, not just new contributions.
Is the switch from Regular to Direct plans tax-free?
No. Switching from regular to direct plans is treated as a redemption and reinvestment. Capital gains tax may be applicable depending on the holding period of your units.
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