Direct Plans vs Regular Plans : What does it mean and why should you care?

Each Mutual Fund scheme has a Direct Plan and a Regular Plan. If you invest in Mutual Funds through a broker or a distributor, you are investing in Regular Plans. All distributors like Scripbox, MyUniverse, Fundsindia, ICICI Direct, Bajaj Capital etc provide only Regular Plans. But when you invest through the Mutual Fund directly or take the help of an advisor like Kuvera , you invest in Direct Plans. All Direct Plan mutual fund schemes require the word “Direct” or “Direct Plan” to be clearly mentioned in the scheme name. Always look for or ask for this in your portfolio statement.

What’s the difference?

Regular Plans pay commissions to the broker or the distributor. This commission is added to the expense ratio of the scheme. So these plans have a higher expense ratio as compared to Direct Plans that do not have commission expenses. Regular Plan commissions can amount to as much as 1.5% of the AUM(the value of your holdings) as commission from Mutual Funds, every year! When brokers tell you their advice is for free, it isn’t. Because you pay a heavy price (commissions and advice biased by commissions) for it. In effect, regular plan investments give you lower returns as compared to Direct Plans because of these commission expenses. Obviously, a broker will never help you or advise you to invest in Direct Plans.

In short, if you invest in Direct Plans, the same schemes will get you better returns.

Direct Plans will help me save 1.5% commissions every year.. that’s not much!

If you consider the compounding impact of this leakage year on year, it adds up to quite a bit. We did the portfolio value calculations for just a Rs 1 lakh investment in a Direct Plan and a Regular Plan over 40 yrs. Your investments will be worth 35% more in just 20 yrs when you invest in Direct Plans. See chart below

Direct Plans vs Regular Plans; A comparison

We assumed a 12% Return on investments and a Total Expenses Ratio of 1.0% for Direct Plans and 2.5% for Regular Plans.

But my broker provides me advice. It’s OK if he earns some commission. Is that wrong?

Yes, it is. Because the commission is paid by the fund house and not by you directly. Whose interest will the broker work for? Isn’t there a conflict of interest when the broker has to make a choice between the scheme that suits your risk profile and objectives vs a scheme that pays attractive commissions?

Agreed, Direct Plans are better, but how do I choose which Funds to invest in?

You can visit kuvera.in and try our Financial Planning Solution here. We do your risk profiling and goal planning to build a detailed financial plan. And recommend which Mutual Fund schemes in which you should invest. We have used our years of Investment Management experience to develop a scientific and disciplined approach to investing. Importantly, we are a Direct Plan only platform so our advice is never biased by commissions.

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52 Responses

  1. Adityaa Guneriwala says:

    V informative

    Never knew the difference

  2. Sudhir Y R says:

    How do you run your company if there are no revenues ? I am sure “there are no free lunches in Business!!!”

    • Gaurav Rastogi says:

      Good question Sudhir. You can learn about our pricing here https://kuvera.in/pricing/

      • Sundar G says:

        Still you are saying that it’s FREE (or ZERO) on your “pricing” website. I’m looking for a single view portfolio site – as you offer “Direct Plans”, how are running the business without getting by both customer and MF AMC. We don’t need your business earning model – but, interested to know how the customer is directly or indirectly charged.

        I’m failing to understand the back ground

        • Gaurav Rastogi says:

          From our FAQ “We thank you for your concern about our financial well being. We generate revenues through B2B services and market data analytics. We will add value added investment products like PMS and AIF strategies in time and for this, we will charge users who wish to avail of these products or services. Financial goal planning and Mutual Fund investing, though, will always remain free for you to use.”

  3. Puja Chowdhury says:

    Do I Need to invest online only using your website by myself ?
    Or Any of your Marketing Executives meet me in person and help me get all the documentation done in physical and collect investments cheques from my place .

    • Gaurav Rastogi says:

      Hello Puja, no paperwork or cheques are required. The entire investment process can be done online through your internet banking account.

      Thanks
      Gaurav

  4. kinshuk says:

    is it safe investing through a website, without having any physical interaction with anybody and without any paperworks? what if after few years the website becomes invisible? how do i get my money back then?

    • Gaurav Rastogi says:

      Dear Kinshuk, thanks for asking us the above. It is totally safe to invest through a platform without any paperwork. All your transaction records, which used to be stored as paperwork earlier, are stored as digital files with central registrar agencies such as CAMS and KARVY and also with all the Mutual Funds you invest in. Your money is always invested in your name and you can always sell your funds and withdraw that money directly with the Mutual Funds company. We will give you all the information necessary to sell your funds and withdraw your money, either it is through us or directly with the Mutual Fund company.

      • Bharath says:

        So does this mean investing here gets synced with the other mutual fund companies database? lets says(HDFC or ICICI or anyother?)

        • Gaurav Rastogi says:

          Yes Bharath, you invest in funds managed by Mutual Fund companies such as HDFC or ICICI. We have 30+ such fund hosues on our platform and you can invest in them directly through us.

  5. Phani says:

    As you said, Advisor may recommend the funds which will have high commission.
    Won’t SEBI have control on deciding the commissions for MF houses? I don’t think it will be in MF houses control.
    Can you please clarify?

  6. i am getting difficulties to do direct mutual funds -because of KYC.

    i am an NRE,is it mandatory to mention whether NRE or not

  7. Sam Sharma says:

    I have recently invested with a small company (a friends’ startup) with a similar offering as the other ones you mentioned above (Scripbox, etc.) and I have invested north of 25L plus SIPs in multiple MFs. How easy will it be to switch to you, in case I decide to go down that path?

    • Gaurav Rastogi says:

      Dear Sam, you could setup your account and import your existing portfolio to Kuvera in under a day. Start at kuvera.in

      Thanks,
      Gaurav

  8. Sreekumar says:

    NAV for Direct plan is higher than Regular , so the purchase price is also higher. Does the customer really benefit?

  9. SK GOUSE says:

    WHAT IS STCG

    • Gaurav Rastogi says:

      STCG stands for Short Term Capital Gains. For equity funds these are taxable at 15% of the total short term capital gains.

  10. RV says:

    Why is it that you talk only about direct plans of mutual funds as a means of wealth creation? No talk of complete portfolio management?

    • Gaurav Rastogi says:

      We do talk about complete portfolio management as well. We just emphasize on using Direct plans in achieving it.

  11. Vikram sapre says:

    I want you to contact me on my on my m.no.9518561536 I want to invest in lumsome AMT.

  12. Sanjay garg says:

    Free for lifetime , for referring purposes

  13. Amal says:

    Why do you say that your services are absolutely free when Kuvera charges approximately Rs 2,500 of yearly fees, once the investment through the platform crosses a lakh ?

    • Gaurav Rastogi says:

      This https://yourstory.com/2017/06/kuvera/ is the article you are referring to we suppose. Please read till the end for – “Update: In October 2017, Kuvera stated to have updated their pricing and now the Mutual Fund investing platform is free to use regardless of portfolio size.”

      You can also read more here https://kuvera.in/pricing . We are very transparent about our pricing. What you see is what you get.

  14. RG says:

    Hi Gaurav,

    Was searching for such a platform. Was finally redirected here via an answer on Quora. Frankly speaking, I never heard of Kuvera before. Doesn’t Kuvera advertise itself much? Brokers like Sharekhan, ICICI etc. are the only ones well known to the general public. I suggest that you should advertise your platform in some way or the other because it’s a really investor friendly platform where you charge no fees for investments in direct funds. Really appreciate that. Kudos to such a platform!

    Coming back to my question:
    I have MF investments North of 2 lakh in regular plans via Sharekhan. Can I import them to Kuvera? If yes, then will I have to sell off these investments and reinvest in Direct plans via Kuvera? How long will the entire process take?

    • Gaurav Rastogi says:

      Sharekhan is a demat account so you cannot import directly to Kuvera. To import completely to Kuvera and to close your demat account with Sharekhan you will need to –

      1.Sell your demat units and then buy them directly from Kuvera.
      OR
      2. Ask Sharekhan to rematerialize your folios so you can import them to Kuvera following the steps in the “Import Portfolio” screen.

      As a first step, your should stop your demat SIPs and start the same SIPs on Kuvera to stop accumulating more demat units.

  15. Sachin says:

    Hi Gaurav,

    Could you please enlighten me on the following:

    1. Currently I invest in regular mutual funds through another platform that automatically monitors growth and suggests new funds, when the current returns are not on track. Does Kuvera offer something similar? Will you suggest me a better plan, while investments are in progress and the current funds do not perform as expected?

    2. I have imported the portfolios to Kuvera. Now, do i have to individually select the direct plan, that i wish to switch to? And if yes, do i have to research before i select a plan from the drop down list, or are they all similarly performing funds that you recommend? (Note: i have minimal knowledge in mutual funds, and the current platform i use shows only one plan that they believe is the best)

    3. How else can i use smart switch, if i don’t have enough coins to avail it? is there an option to pay for this service?

    • Gaurav Rastogi says:

      Hello Sachin,

      1. Yes, we update our recommendations as markets change. We will advice you accordingly but you will have to decide to execute on that advice or not.

      2. Yes, for each regular plan please select the Direct plan you want to switch to. If you are happy with your funds then just choose the Direct plan counterpart from the drop down (it will have the same name with “Direct Plan” appended to it)

      3. Right now Coins is the only way. We find a simple “Whatsapp” share easily gets most user 1000+ coins.

      Hope it helps. Also not [email protected] is a better channel for queries like this for a prompt response.

      Regards,
      Gaurav

  16. RANITA PAL says:

    I have a demat account in Axis bank..I.e. Axis Direct. 3 Sip run through it for 9months. How can I switch this sip from regular to direct through kuvera.

    • Gaurav Rastogi says:

      Axis Direct is a demat based account so, you cannot import folios directly to Kuvera. To import completely to Kuvera and to close your demat account with them you will need to –
      1.Sell your demat units and then buy them directly from Kuvera.
      OR
      2. Ask them to rematerialize your folios so you can import them to Kuvera following the steps in the “Import Portfolio” screen.

      As a first step, you should stop your demat SIPs and start the same SIPs on Kuvera to stop accumulating more demat units.

  17. Krunal Sabnis says:

    How does your SIP work ? Is it SIP or lumpsum buying at the regular intervals?
    My concern is what is lumpsum buying is stopped from Fund House and only SIPs are allowed?

    • Gaurav Rastogi says:

      It is a true SIP. It is not periodic lumpsum investments. Even if fund house stops lumpsum investments, your SIP at Kuvera will continue.

  18. Arjun says:

    HI Team,

    Are you also help to track my EPF, NPS and PPF accounts here? I just want to know if I can track all my investment under one app.

  19. Kalyan Singh says:

    Is facility of systematic transfer from a Liquid mutual fund (Lump sum deposited here) to an Equity mutual fund of same fund AMU possible?

  20. kiran says:

    Hi ,
    am having two portfolios with kotak and fundsindia. How can I switch to Kuvera?

    • Gaurav Rastogi says:

      To move completely to Kuvera from your current platform(s), we recommend the following steps (entire process is online) –

      1/ Import your existing units to Kuvera so you can track them here

      Setup an account with Kuvera and complete KYC check and bank account setup.
      After logging in, please follow the steps in the Import Portfolio tab. Do read the “Import Portfolio” FAQ at the bottom of the page as well.

      We read and process your Consolidated Account Statement in real time and you can start placing orders in the same folios as your current regular and Direct plans immediately.

      2/ Move your SIPs from current platform to Kuvera

      Set Mandate amount in your profile and complete the mandate setup process. You will need an active mandate to be able to place SIP order.
      START your direct plan SIPs on Kuvera in the same folio as your current plans and then STOP your SIPs with other platforms. Ps: if your regular plan platform does not agree to stop your SIPs (saying you need minimum months etc etc), read this – https://www.cnbctv18.com/personal-finance/how-to-stop-your-sip-when-you-want-to-also-when-the-distributor-refuses-to-stop-410731.htm

      3/ Switch your Regular plan units to Direct plan units – there are 3 ways that Kuvera makes it easy to switch from Regular plan units to Direct plan units. You can read in detail about them here – https://blog.kuvera.in/3-ways-to-switch-your-regular-plans-to-direct-mutual-fund-plans/

      Hope the above clarifies. Email [email protected] if you get stuck

  21. Sudipta says:

    Hi,

    If I import my portfolio to kuvera, and start SIP or do a lumpsum purchase, can I log into my AMC login and see thee same number of units as Kuvera?

    And if I do transaction there, will that also be synced with Kuvera. Whether buying or selling…?

  22. Basudev says:

    Is it true no commission even after 1lakh fund

    • Gaurav Rastogi says:

      Yes, no fees regardless of portfolio value.

      Since we are Direct Plan only so no commission ever as well.

  23. Vijayakumar says:

    Hi, I have couple of SIP orders invested in direct mutual funds through Zerodha-Coin and wanted to import them into Kuvera. Can you guide me with the steps?

    • Gaurav Rastogi says:

      Kuvera is a non-demat platform and zerodha coin is a demat platform. Bear that in mind as you read further.

      You have two ways to move completely to Kuvera and close your zerodha demat account –

      1 Subject to exit load, lock-in and tax considerations, you can sell your demat units through zerodha. Once sold, your zerodha account can be closed. Then place fresh purchase requests on Kuvera in the same schemes.

      OR

      2 Ask your broker to rematerialize your folios. There will be a nominal charge for it. Once folios are rematerialized you can import them to Kuvera following the steps in the “Import Portfolio” screen. You can then close your zerodha account.

      If both these options are not feasible or inconvenient, consider investing new money in Mutual Fund Direct Plans through Kuvera and over time sell your demat holdings and repurchasing them in Kuvera.

      Ps: just importing your portfolio today (following the steps in “Import Portfolio” tab) will not close your demat account with zerodha. Further orders placed from demat folios on our platform will get reversed by the AMC. You will have to convert the units from demat to non-demat using one of the steps above.

      Let us know how it goes and if we can help in any way.

  24. Pramila says:

    How are your different from coin of zerodha. Other then in nondemat form of yours.
    What advantage or disadvantages i have from shifting from coin to your platform

  25. Vikram verma says:

    Sir, I have invested through broker agent in different sip, Now I want to switch to kuvera, If I make a smart switch from regular to direct, will my running sip be close/stop, or it will continue as direct plan. Will my collected units till now will merge in direct plan for the same fund in direct plan

    • Gaurav Rastogi says:

      If I make a smart switch from regular to direct, will my running sip be close/stop, or it will continue as direct plan.
      You will have to stop existing SIPs in regular plans and start Direct SIPs in same folio on Kuvera.

      Will my collected units till now will merge in direct plan for the same fund in direct plan
      Your collected units will be regular plan units till you switch them to Direct plan on Kuvera.

  26. sam says:

    Dear Gaurav, I have been investing in MF’s through ICICI direct all these years. is there a possibility of me importing those funds to Kuvera if I start an account and switching the same to direct funds? advice.

    • Gaurav Rastogi says:

      The steps to do the same are:

      1/ Import your existing units to Kuvera so you can track them here

      Setup an account with Kuvera and complete KYC check and bank account setup.
      After logging in, please follow the steps in the Import Portfolio tab. Do read the “Import Portfolio” FAQ : https://kuvera.in/faq/import

      We read and process your Consolidated Account Statement in real time and you can start placing orders in the same folios as your current regular and Direct plans immediately.

      2/ Move your SIPs from current platform to Kuvera
      START your direct plan SIPs on Kuvera in the same folio as your current plans and then STOP your SIPs with other platforms. Ps: if your regular plan platform does not agree to stop your SIPs (saying you need minimum months etc etc), read this – https://blog.kuvera.in/how-to-stop-your-sip-when-your-distributor-refuses-to-stop-sip/

      3/ Switch your Regular plan units to Direct plan units – there are 3 ways that Kuvera makes it easy to switch from Regular plan units to Direct plan units. You can read in detail about them here – https://blog.kuvera.in/3-ways-to-switch-your-regular-plans-to-direct-mutual-fund-plans/

      Hope the above helps. Let us know if you get stuck on any step.

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