Why Direct Plans Aren’t Always the Best Option
Why Direct Plans Aren’t Always the Best Option
Direct mutual fund plans offer higher returns because they exclude distributor commissions. But does that automatically make them the best choice for everyone?
Not necessarily. Let’s break down why direct plans might not always be the ideal route — especially for beginners, busy professionals, or those lacking financial expertise.
📊 What Are Direct and Regular Plans?
✅ Direct Plans:
- Purchased directly from the AMC.
- No commission or intermediary fees.
- Lower expense ratio = higher potential returns.
🧾 Regular Plans:
- Purchased through a distributor/advisor.
- Includes distributor commission in expense ratio.
- Slightly lower returns due to fees.
🤔 Then Why Choose Regular Plans?
While direct plans save you on costs, they don’t come with guidance. This is where regular plans offer value.
1. Lack of Financial Knowledge
Most investors don’t know how to:
- Select the right mutual fund.
- Monitor and rebalance the portfolio.
- Align funds with goals.
A qualified Mutual Fund Distributor (MFD) does all this for you in regular plans.
According to AMFI, over 85% of retail investors still choose regular plans — because they prefer advice, service, and accountability.
2. Emotional Investing & Behavioral Bias
Without a guide, many investors:
- Panic during market crashes and redeem at a loss.
- Chase past performance and switch funds unnecessarily.
Advisors offer handholding, helping clients stick to long-term plans.
3. Time Constraints
Not everyone has the time to:
- Track NAVs
- Compare fund performance
- Understand tax implications
For busy professionals, paying a small fee to an expert is more efficient and less stressful.
4. Goal-Based Planning
Distributors don’t just suggest funds — they help build a custom roadmap:
- Retirement planning
- Child education goals
- SIP tracking and reviews
This personalized planning isn’t available in direct platforms.
5. Post-Sales Support
With a regular plan, MFDs help with:
- SIP pauses, resumes, changes
- Capital gains reporting
- Exit load understanding
- KYC updates
In direct platforms, you're mostly on your own.
📉 How Much Return Do You Lose in Regular Plans?
- Difference in expense ratio: ~0.5% to 1%.
- On a ₹10L investment over 10 years, this could mean ₹1L–₹2L less in return.
But if a regular plan helps you avoid mistakes, stay disciplined, and invest consistently, that trade-off might actually work in your favor.
✅ So, Who Should Choose What?
| Investor Type | Best Option |
|---|---|
| Beginner with no guidance | Regular Plan |
| DIY investor with financial expertise | Direct Plan |
| Busy working professional | Regular Plan |
| Someone seeking goal-based advice | Regular Plan |
| Cost-conscious & confident in fund selection | Direct Plan |
🎯 Conclusion
Direct plans are cheaper — but not always better.
If you have the time, knowledge, and confidence to manage your own portfolio, go for direct plans.
But if you value advice, convenience, and behavioral coaching, a regular plan via a trusted advisor can help you achieve better long-term outcomes.
Want a free consultation on choosing the right path for your investments?
👉 Connect with us or talk to your financial advisor today!