Regular vs Direct mutual funds: what the extra cost buys

• Same fund manager, same portfolio, same risk.
• Different expense ratio: the Regular plan's includes the distributor's commission, so its NAV grows a little slower.
• Different NAV: the two plans start at the same price but drift apart over time because of the cost gap.

The gap compounds. At the typical 0.98% a year, a ₹10,000 monthly SIP for 20 years at an assumed 12% a year ends about ₹10.2 lakh lower in the Regular plan. On a ₹1 crore portfolio, the gap is about ₹98,000 in the first year alone.

That is the price of advice and service. Whether it is worth paying depends on what you get for it.

• Choosing funds, and just as important, not choosing the ones that look good only on recent returns.
• Combining them so they don't overlap, and rebalancing when markets move.
• Tax planning: using the ₹1.25 lakh yearly exemption, the order of redemptions, losses.
• Paperwork: KYC, nominations, transmission after a death, address changes.
• Keeping you invested in falls, which is where most investors lose more than any expense ratio.

• You know what to buy, will review it every year and won't panic in a fall: Direct.
• You want the choice, review and tax planning done for you: Regular, through a distributor you trust and who tells you what they earn.
• Switching from Regular to Direct counts as a sale, so check the capital-gains tax and exit load before you switch.