{"id":8226,"date":"2026-10-30T15:38:56","date_gmt":"2026-10-30T10:08:56","guid":{"rendered":"https:\/\/1finance.co.in\/1f-dashboard\/?post_type=blog&p=8226"},"modified":"2026-10-30T16:26:38","modified_gmt":"2026-10-30T10:56:38","slug":"regular-vs-direct-mutual-funds-sebi","status":"publish","type":"blog","link":"https:\/\/1finance.co.in\/1f-dashboard\/blog\/regular-vs-direct-mutual-funds-sebi\/","title":{"rendered":"Direct vs regular mutual funds: What changes under SEBI\u2019s new default plan rule?"},"content":{"rendered":"\n
When you select a mutual fund, you are likely to examine its past returns, investment strategy and the risks involved. However, the decision to invest through a regular or direct mutual fund plan can also influence the amount you eventually accumulate. Both plans invest in the same underlying portfolio, yet the difference in their recurring expenses affects how much of the fund\u2019s returns remain invested on your behalf.<\/p>\n\n\n\n
This cost difference has recently received regulatory attention. On 28 October 2026, Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey announced that direct plans would become the default option on asset management companies\u2019 (AMCs) digital platforms from 1 November 2026. Investors selecting regular plans would also be informed about their higher expense ratios.<\/p>\n\n\n\n
The announcement brings an often-overlooked investment cost into focus. You can continue investing through a regular plan and receiving assistance from an intermediary. However, knowing how much that arrangement costs over several years gives you a clearer basis for choosing between the two plans.<\/p>\n\n\n\n
Direct vs regular mutual funds: Why do your returns differ?<\/h2>\n\n\n\n
When you invest in a mutual fund scheme, your money is pooled with contributions from other investors and managed according to the scheme\u2019s investment objective. Its direct and regular plans share the same portfolio and fund manager, although you incur different expenses depending on the plan selected.<\/p>\n\n\n\n
A regular mutual fund allows you to invest through an intermediary, who can assist with scheme selection, transactions and investment-related services. That intermediary then receives a commission from the AMC, funded through the regular plan\u2019s recurring expenses, increasing the overall expense ratio. With a direct mutual fund, you invest directly in that scheme, without any intermediary’s help; this removes the commission part, resulting in a lower expense ratio.<\/p>\n\n\n\n
The Total Expense Ratio (TER) expresses these annual expenses as a percentage of its assets, are charged to the fund and reflected in its Net Asset Value (NAV), which is the value of each mutual fund unit after accounting for expenses and liabilities. Since the regular plan incurs additional distribution expenses, its NAV and returns differ from those of the direct plan over time.<\/p>\n\n\n\n
Why has SEBI brought attention to direct mutual funds?<\/h2>\n\n\n\n
SEBI\u2019s announcement is intended to make the cost difference more apparent when you purchase mutual funds digitally. Now, direct plans will appear as the default selection on AMC digital platforms from 1 November 2026, while investors choosing regular plans will be informed about their higher expense ratios.<\/p>\n\n\n\n