Direct vs Regular: The 1% That Costs You ₹12L Over 20 Years
Regular plans pay distributors 0.5-1.5% annually from your returns. On a ₹10K SIP over 20 years, the difference is staggering.
₹10K monthly SIP for 20 years — direct vs regular
over 20 years on just ₹10K/month SIP
What regular plans pay distributors
When you buy a mutual fund through a bank, advisor, or distributor, they earn a commission — called 'trail commission' — of 0.5–1.5% annually on your invested amount. This comes from the expense ratio charged to you. A regular plan charges 1.5% expense while the direct plan charges 0.5%. The 1% difference is the distributor's cut, paid from your returns, every year, for as long as you hold.
Why distributors push regular plans
A ₹20L portfolio in regular plan pays the distributor ₹20,000–₹30,000/year in trail commission — for doing nothing after the initial sale. This is why banks, insurance agents, and 'wealth advisors' aggressively push regular plans. They have no incentive to recommend direct plans. Some distributors add value through portfolio construction and rebalancing — but most simply sell and collect trail.
The compounding damage
1% per year sounds small. But compounding turns it massive. On a ₹10K monthly SIP: after 10 years, the difference is ₹2.8L. After 20 years: ₹11.8L. After 30 years: ₹35L+. The longer you hold, the more devastating the regular plan tax becomes. And unlike other costs, this is permanent — the distributor earns trail every single year.
What to do
1. **Switch all existing funds to direct plans** — you can do this online via the AMC website or Groww/Kuvera. No exit load on the switch if held > 1 year.\n\n2. **Use Groww, Kuvera, or MF Central for direct plan purchases** — zero commission platforms.\n\n3. **If you want advice, pay a fee-only financial planner** (₹5,000–₹15,000/year) instead of the perpetual 1% trail commission.\n\n4. **Check your portfolio on MF Central** — it shows your exact expense ratio for each fund.