Direct Vs Regular Mutual Funds - Which Is Best For NRIs And OCIs?

NRIs looking to invest in Indian mutual funds often face the choice between direct and regular mutual funds. While both invest in the same underlying assets, their structures differ slightly, impacting costs and returns. This article explains the differences between direct and regular mutual funds in detail.

June 7, 2024
5 mins
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By investing in direct mutual funds, you deal directly with the mutual fund company, basically eliminating an intermediary—a broker, financial advisor, or distributor. On the other hand, regular mutual funds are offered by these intermediaries like iNRI. While direct funds may be suitable for one, regular funds may be best for the other.

Thus, understanding Direct Vs. Regular Mutual Funds are crucial for NRIs and OCIs starting their investments.

What is a Direct Mutual Fund?

Direct mutual funds are a type of mutual fund scheme in which you can directly purchase units from the mutual fund company, through a mutual fund's website, or through a platform that offers direct mutual funds. 

Direct mutual funds do not have intermediaries such as brokers or distributors, which is why they are popular for having a lower expense ratio. This reason is quite compelling for most investors to opt for direct mutual funds. But is it enough? Let’s find out.

What is a Regular Mutual Fund?

Regular mutual funds are offered by intermediaries such as brokers, financial advisors, or distributors.

Invest in the best regular mutual funds with iNRI

Investing in regular mutual funds through these intermediaries comes at a cost—a higher expense ratio. But this additional cost is justified by the expert guidance and assistance in the investment process. 

The higher fund expense ratio is due to the commissions paid to intermediaries for their services. The mutual fund house directly pays these commissions to the intermediary. As an investor, you do not have to pay any additional fees.

Direct Vs Regular Mutual Funds For NRIs And OCIs: Key Differences

Debt Mutual Fund Information
Aspect Direct Mutual Funds Regular Mutual Funds
Net Asset Value (NAV) Higher Lower
Investor Control Full control over investment decisions Investor has control, but intermediaries give recommendations that help increase your overall portfolio returns
Commission to Intermediaries No commission Varies between 0.1% to 2%
Expense Ratio Lower, due to no intermediaries Higher, due to commissions
Returns Potentially higher Potentially lower
Fund Selection You pick your funds An expert will recommend funds based on your unique investment requirements like risk appetite, investment horizon, financial goals, etc.
Distribution Channels Primarily through mutual fund company's website or online platforms Through banks, financial advisors, and other intermediaries
Expert Guidance Investing in direct mutual funds is your DIY project (Do-It-Yourself). While platforms like iNRI offer value added features like smart investing with personalised recommendations (for fund selection), portfolio review and re-balancing.

Direct Vs Regular Mutual Funds: Differences In Detail

Expense Ratio and Commission

Direct mutual funds generally have lower expense ratios compared to regular mutual funds. Since there are no intermediaries involved, there are no commissions. The expenses associated with managing direct mutual funds are lower, leading to higher returns for investors. 

On the other hand, regular mutual funds are offered by intermediaries and brokers. Their commission ranges between 0.1% to 2%. However, the commissions are not charged from the investor. The Asset Management Company (AMC) includes this cost on the fund’s total expense ratio and pays it to the broker. Thus, regular funds have a higher expense ratio.


Due to their lower expense ratio, direct mutual funds have the potential to earn higher returns than regular mutual funds over the long term. 

Investors in direct mutual funds can benefit from compounding returns, resulting in significant wealth accumulation over time.

However, it is important to note that you will be solely managing your investments. Thus, you must be efficient while picking, managing and investing in funds.

Net Asset Value (NAV)

Direct plans tend to have higher NAVs than regular plans for the same mutual fund scheme. This is because direct plans do not involve commissions. The cost of purchasing each fund unit is low, and the total returns tend to be higher.

On the other hand, since regular plans include distributor commissions in their expense ratios, their NAVs are lower. However, lower NAVs don’t necessarily mean higher overall returns.

Investor Control

In direct mutual funds, you have full control over your investment decisions. You need to research, select, and manage your investments solely without relying on any advisor/intermediary. 

On the other hand, if you are investing through regular mutual funds, you will have access to expert advice and recommendations. These intermediaries will monitor, manage and suggest timely rebalancing strategies to keep up with the ever-changing market dynamics. 

iNRI’s Smart Investing Tool helps you invest in the best mutual funds based on your investment tenure and risk appetite.

Distribution Channels

Direct mutual funds are available through the mutual fund company's website or online platforms that deal in direct funds.

On the other hand, regular mutual funds are distributed through channels like banks, financial advisors, and online platforms. These intermediaries earn commissions for distributing regular mutual funds.

​​Direct Vs Regular Mutual Funds - Which Is Better?

If you are unable to decide which mutual fund to invest in - direct vs regular. Here are some possible scenarios that help you decide which option suits you better -

The choice between direct vs. regular funds

As mentioned above, the choice between the two depends on your investment style and preferences.

Opt for Direct Mutual Funds if

  • You have the expertise to shortlist the most suitable fund for your financial goals.
  • You have the time to manage, re-assist and re-balance your holdings from time to time as required. 
  • You do not want to pay that extra amount as part of the fund’s total expense ratio.

Opt for Regular Mutual Funds if

  • You require expert guidance to help you pick the right mutual fund for your investment tenure, risk profile and goals.
  • You want to have a stress-free investment experience and have the advisor manage your investments on your behalf. 
  • You do not mind paying that extra commission to earn higher risk-adjusted returns.

Raj, an NRI in the US, wanted to invest in mutual funds - Inspired by his cousin Priya.

Priya started investing with a financial advisor but found the fees too high, so, switched to direct mutual funds for lower costs but struggled with managing them independently. 

She eventually returned to an advisor for better risk adjusted returns and portfolio management, despite the higher cost.

Listening to the story, Raj, valuing both control and expert advice, decided the potential for better returns with professional guidance outweighed the cost savings of direct investing. He opted for a regular mutual fund for a well-managed portfolio.


While going direct can save you money, it's important to consider your comfort level. If the stock market seems scary or confusing, having an advisor by your side can be a big help. Also, Association of Mutual Funds in India AMFI data shows that investors with advisors tend to stick with their plans for the long haul. 

Advisors can help you navigate the ups and downs of the market and make choices that are right for you. The downside? There are some fees involved in getting this expert help. But it's actually worth it when you don’t have the time or expertise. 

The bottom line?  There's no one-size-fits-all answer.  Consider your investment style and goals before choosing a plan.

Direct Vs Regular Mutual Funds: Frequently Asked Questions (FAQs)\

How will I know if I invested in a direct or a regular plan?

For direct schemes, the mutual fund name will mention the word ‘Direct’. If no such suffix is present, the scheme is considered a regular plan.

Can I switch from a regular plan to a direct one?

Yes, you can switch anytime from a regular to a direct plan. However, these switches will be considered as redemption, any applicable exit load will be charged. 

Further, switching to a direct plan will indicate that you no longer have access to professional expert guidance.

How will I know the difference in TER between regular and direct plans?

You can compare the expense ratios of both plans. The expense ratios are listed under each fund's fund details.

Is there any charge for switching mutual funds?

While switching from a regular plan to a direct plan of the same mutual fund scheme typically doesn't incur a separate fee, it's treated as a redemption and a fresh purchase for tax purposes.

This means you'll realise capital gains on the sale of your existing units, and these gains will be taxed depending on the holding period and the type of mutual fund.

Which is better: direct or regular mutual fund?

The choice between the two plans depends on your investment needs. If you have the expertise and time to manage your investment portfolio, you may opt for direct plans. But, if you don’t have any of the two, it’s best to invest through an expert or intermediary who will manage your investment for you.

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