Direct Vs Regular Mutual Funds: Key Differences And How To Pick The Right Option

Many first-time investors experiment with different investment avenues—some choose stocks, while others gravitate toward mutual funds. For beginners, it’s important to understand that mutual funds come

in two broad categories based on how you invest: regular mutual funds and direct mutual funds.

Regular mutual funds are purchased through a distributor or advisor, while direct mutual funds can be bought directly from the fund house or through digital platforms such as Groww or Zerodha (Coin).

Direct vs Regular Mutual Funds: What’s the Difference?

Both options invest in the same mutual fund scheme—the only difference lies in the route of investment.

• Direct mutual funds have a lower expense ratio because no distributor is involved. There is no commission payout, allowing investors to retain a higher portion of returns.
• Regular mutual funds carry a higher expense ratio because distributors earn a commission for recommending and managing investments, which slightly reduces the investor’s overall returns.

If you’re new to investing and need guidance, regular funds may be more suitable. If you’re confident about researching and selecting schemes on your own, direct funds can be more cost-efficient.

Who Should Choose Regular Mutual Funds?

1. Beginners with little to no knowledge of mutual funds or investing.
2. Investors with diversified portfolios who lack the time to research schemes independently.
3. Those who prefer professional advice and ongoing support from a financial intermediary.

Who Should Choose Direct Mutual Funds?

• Investors who want to avoid distributor commissions and maximise returns.
• Those who understand at least the basic principles of investing and mutual funds.
• Investors already using digital platforms like Groww or Zerodha, who prefer the convenience of buying direct funds without visiting multiple AMC websites.