Direct mutual fund plans were introduced from January 1, 2013. In this article, we list the difference in returns between an 8-year SIP in a direct plan and a regular mutual fund. Fearing that this would disrupt sales, SEBI has still not renamed “regular plans” what they really are: “commission plans” – nothing “regular” about them.

However, thanks to advances in technology, the Direct Plan AUM has grown slowly but steadily – nearly 40% of total industrial AUM when we look at the Average Assets under Management (AAUM) reported on AMFI for the October-December 2020 quarter view (without) ETFs without regular / direct plans and domestic funds of funds). Hence the screams “direct AUM is not sticky”. About 30% of total direct AUM is held in cash and overnight funds (usually institutional funds).

For those who don’t know how regular plans work: every day before the net asset value is declared, Mutual funds deduct their expenses and commissions for sellers from the regular AUM plan. In the direct plan there is no commission, only expenses.

The next time a seller proudly declares that they have paid from AMCs for the service they provide to investors, please remind them that the AMCs are merely removing the commissions from the current market value of the investments.

While it’s obvious that regular plans cost the most and would give back less, the real reason to avoid regular plans is the conflict of interest involved. When someone you employ is paid by someone else – from your money, and you have no control over payment terms, the arrangement, to put it simply, is far from ideal.

The choice in front of the investor is very simple:

  1. DIY. Mutual funds are not rocket science, although many investors want to be rocket scientists.
  2. Get impartial advice from a SEBI-registered fee advisor

Investment funds with direct or regular plan: 8-year SIP yield spread

We considered 266 schemes for this study. The complete dataset is available on request. We present some results here.

The largest difference in return and investment value was found for the HDFC Hybrid Equity Fund. howeverThe currently available net asset value is only the adjusted net asset value responsible for the merger of the system in 2018. The numbers (shown below) are significantly higher than the rest of the package and so are not taken into account. The numbers for the Twin HDFC Balanced Advantage look better, however.

The following table shows the data for the “top” 15 funds. If a Rs. 1000 per month SIP was started on January 1, 2013, the XIRR of the direct plan investment would be 1.93% higher than that of the regular plan investment (see picture below for yield differences).

This may not sound like much, but the value of the direct plan investment would be (16.37 x 1000) times the regular plan investment for the Invesco midcap fund (1st entry below). That’s 16.37 months in which investments in commissions are lost.

Schema nameAmount in the form of SIP rates that have been lost due to commissions
Invesco India Midcap Fund16.37
Invesco India Financial Services Fund13.70
Invesco India Contra Fund13.54
Invesco India Multicap Fund13.39
Invesco India Infrastructure Fund13.19
Axis Midcap FundApril 13
BNP Paribas Mid Cap Fund12.93
Canara Rob Emerg equity fund12.92
Invesco India Growth Opp Fund12.62
Invesco India Largecap Fund12.19
Edelweiss Mid Cap Fund12.01
BNP Paribas Multi Cap Fund11.89
BOI AXA Tax Advantage Fund11.72
Axis Focused 25 Fund11.71
Indiabulls Blue Chip Fund11.62

The following image shows the XIRR return differences and the actual value.

Table of 8-year SIP yield spread for mutual funds with direct and regular plan
Direct vs Regular Plan Mutual Funds 8-year SIP yield differential

The dates are self-explanatory and the choices are obvious.

Share if you found this useful

Use our robo-advice Excel template for a complete financial plan! More than 400 investors and consultants use this!

Unveil the secrets of successful financial advisors and entrepreneurs with our new course!

My new book for children: “Chinchu is getting a superpower!” is now available!

Both boy and girl versions of Chinchu are given a superpower
Both boy and girl versions of Chinchu are given a superpower.

Most investor problems stem from a lack of informed decision making. We all made bad decisions and money mistakes when we started making money and spent years correcting those mistakes. Why should our children go through the same pain? What is this book about? If we, as parents, had to cultivate in our children a skill that is vital not just to money management and investment, but to every aspect of life, what would it be? My answer: Good decision making. In this book we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan it and teach him some key decision making and money management ideas is the narrative. What the readers say!

Feedback from a young reader after reading Chinchu receives a superpower (small version)
Feedback from a young reader after reading Chinchu is getting a superpower!

A book that you absolutely have to read for adults too! This is something every parent should teach their children from a young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple words. – – Arun.

Buy the book: Chinchu Gets a Superpower for Your Child!

This is how you benefit from writing content:: Our new e-book for those interested in generating extra income from content writing. It’s available at a 50% discount for Rs. Only 500!

Take part in our courses in exclusive Facebook groups!

  • 550+ Members are now part of our new course: How to get people to pay for your skills! (Watch 1st lecture for free). Learn How To Get People To Pay For Your Skills! Whether you are a professional or a small business owner who wants more customers via online visibility, or an employee who wants an extra income or passive income, we’ll show you how to achieve it by showing your skills and build a community that trusts you and pays you!
  • Goal-oriented portfolio management! Join 2220+ members and get clarity on how to plan your goals and get the corpus you need, regardless of market conditions! Watch the first lecture for free! One time payment of Rs. Only 3000. No recurring fees! Lifetime access to videos (over 10 hours of content) in an exclusive Facebook group! Reduce Fear, Insecurity, and Doubt When Investing! Learn how to plan your pre- and post-retirement goals with confidence.

Do you want to check if the market is over or undervalued? Use our market valuation tool (works with any index!), or you can buy the new one Tactical buy / sell timing tool!

We publish Mutual Fund Screener and Momentum, low volatility stock screeners .every month.

About the author Pattabiraman Editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and lead author of freefincal. He is an Associate Professor at the Indian Institute of Technology in Madras. since August 2006. Connect with him via Twitter or Linkedin Pattabiraman co-authored two printed books, You can also be rich with goal-oriented investing (CNBC TV18) and Game changer and seven others free e-books on various money management topics. He is the patron and co-founder of “Paid India,“An organization promoting impartial, commission-free investment advice. He conducts free money management sessions for companies and associations based on money management. Include previous engagements World bank, RBI, BHEL, Asian Colors, Cognizant, Madras Nuclear Power Plant, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. Write to Pattu for a chat [at] freefincal [dot] com

About freefincal & its Content Policy Freefincal is a news media organization dedicated to providing original analysis, reports, reviews and insights into developments in mutual funds, stocks, investments, retirement planning and personal finance. We do this without any conflict of interest or bias. follow us on Google news. Freefincal serves more than one million readers (2.5 million page views) annually with articles that are based only on facts and detailed analysis of its authors. All statements are verified from credible and knowledgeable sources prior to publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented are only conclusions that are supported by verifiable, reproducible evidence / data. Contact information: Letters {at} freefincal {dot} com (sponsored contributions or paid collaborations are not maintained)

Connect with us on social media

Our publications

You can also be rich with goal-oriented investing

You can also be rich with goal-oriented investingThis book, published by CNBC TV18, is designed to help you ask the right questions, find the right answers. Since it includes nine online calculators, you can create custom solutions to suit your lifestyle too! Get it now. It is also available in Kindle format.

Gamechanger: Forget startups, join corporate and still live the life you want Gamechanger: Forget startups, join corporate and still live the rich life you wantThis book is for young earners who want to learn their basics from day one! It will also help you travel to exotic places at a low cost! Get it or give it to a boy Earner.

Your ultimate travel guide

Travel Training Kit Cover New This is an in-depth analysis of vacation planning, finding cheap flights, cheap accommodations, what to do when traveling, how slow travel is better financially and psychologically, with links to the websites and handshakes at every step. Get the PDF for Rs 199 (Instant Download)

Free Android apps


Please enter your comment!
Please enter your name here