Direct vs Regular Mutual Fund Cost Calculator
SEBI publishes a worked example of what a regular plan costs, then says the difference can significantly affect your wealth over ten years and stops without computing it. This finishes that arithmetic, for a lump sum or a monthly SIP, and reports the year at which the gap passes everything you have paid in.
A guess, and it moves both columns together, so the gap is far less sensitive to it than the totals are.
From the scheme factsheet or the AMC site. Published monthly, and different for every scheme.
Same scheme, direct plan. SEBI requires it to exclude distribution commission.
Enter both expense ratios, from the factsheet of the scheme you hold, to see what the difference costs.
Cite this calculator
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The Money Decoded. "Direct vs Regular Mutual Fund Cost Calculator." https://themoneydecoded.com/calculators/direct-vs-regular
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SEBI gives the example and stops before the answer
The regulator's own investor page sets up the sum and leaves it unfinished. It takes 1,00,000 rupees at 10% before fees, applies a 1.5% expense ratio to the regular plan and 0.5% to the direct one, and notes that over ten years the difference "can significantly impact your wealth due to the power of compounding". It never says by how much.
On SEBI's own numbers, it is this:
| Years | Regular, 8.5% net | Direct, 9.5% net | Gap |
|---|---|---|---|
| 10 | Rs 2,26,098 | Rs 2,47,823 | Rs 21,724 |
| 20 | Rs 5,11,205 | Rs 6,14,161 | Rs 1,02,957 |
| 30 | Rs 11,55,825 | Rs 15,22,031 | Rs 3,66,206 |
At twenty years the gap has passed the entire original investment. That is not a projection anyone has to accept on trust: it is the regulator's example, carried to the horizon the regulator mentions.
What the two plans actually differ on
The portfolio, the manager and the strategy are the same. The route and the fee are not. A regular plan is bought through a distributor and its expense ratio carries that distributor's commission. A direct plan is bought from the asset manager or an online platform with no intermediary.
SEBI requires a direct plan to have a lower expense ratio excluding distribution expenses and commission, and no commission may be paid from it. Under the Master Circular for Mutual Funds, all fees and expenses charged in a direct plan, in percentage terms and under every head including the investment and advisory fee, may not exceed those charged under the same heads in the regular plan. So the entire difference the calculator shows is fees, and nothing about the investments themselves.
The year the gap passes what you paid in
This is the number the calculator reports that nothing else on the subject does. Fees are charged on the whole balance every year, so the gap does not grow in step with your contributions. It grows with the balance, which compounds. At some point the money lost to the higher expense ratio exceeds every rupee you have paid in.
Where that point falls depends on your expense ratio gap, your horizon and how you invest. A single crossover year is easier to hold on to than a table of totals, which is why it is stated plainly rather than left for the reader to spot.
The half of this that is not arithmetic
The cost of a regular plan is calculable. The value of what it buys is not. The commission inside a regular plan pays a distributor, and the honest question is not whether the fee exists but whether you are receiving advice for it, and whether that advice changes what you do.
SEBI does not treat this as one-sided. Its investor material puts regular plans with beginners and hands-off investors, and direct plans with do-it-yourself and cost-conscious ones. An investor who panics in a drawdown and sells can lose more than any expense ratio will ever cost them, which is the subject of our post on loss aversion. This tool prices one side of that trade and takes no view on the other.
What this calculator does not do
It does not recommend a plan, name a scheme or an asset manager, or forecast a return. It does not supply a typical expense ratio, because the total expense ratio differs by scheme and category and is republished monthly, so a default here would be a guess wearing the clothes of a benchmark. It asks for both of your own numbers instead.
It also leaves out exit load and capital gains tax, both of which apply on redemption and neither of which differs between the direct and regular plans of the same scheme. They change what you keep. They do not change the gap between the two columns, which is what this is measuring. The tax treatment is covered in capital gains tax, short-term versus long-term, and the fee-and-tax question on a monthly plan is handled by the SIP calculator.
Pair this with the guide
The companion post works through what the two plans differ on, why one percentage point of annual fee does so much damage over a long horizon, and the half of the question that arithmetic cannot settle: Direct vs Regular Mutual Fund: What the Gap Costs.
Frequently asked questions
How much does a regular mutual fund plan actually cost?
It depends on the expense ratio gap and the horizon, and the honest way to see it is to run your own scheme's two numbers. SEBI's investor page uses a worked example of 1.5% on the regular plan against 0.5% on the direct one, applied to 1,00,000 rupees at 10% before fees. On those figures the regular plan ends ten years later at about 2,26,098 rupees and the direct plan at about 2,47,823, a gap of 21,724. Run the same example to twenty years and the gap is 1,02,957, which is more than the original investment. SEBI states the difference can significantly impact wealth over ten years and does not compute it.
What is the difference between a direct and a regular mutual fund plan?
The portfolio, the fund manager and the strategy are identical. What differs is how you buy and what you are charged. A regular plan is bought through a distributor, and its expense ratio includes the commission paid to that distributor. A direct plan is bought from the asset management company or an online platform with no intermediary, and SEBI requires its expense ratio to exclude distribution expenses and commission. Under the SEBI Master Circular for Mutual Funds, no fee head in a direct plan may exceed the same head in the regular plan of the same scheme.
Where do I find the expense ratio for my scheme?
From the scheme factsheet or the asset manager's own site, where the total expense ratio is published and updated monthly, and from AMFI, which hosts the TER of mutual fund schemes across the industry. You need two numbers for the same scheme: the regular plan and the direct plan. This calculator asks for both rather than defaulting to a typical figure, because the gap varies by scheme and category and a default here would be a guess dressed as a benchmark.
Is a direct plan always better than a regular plan?
The cost side is settled arithmetic and the rest is not. A direct plan is cheaper by the commission, every year, on the whole balance. What a regular plan buys with that commission is a distributor's advice, and whether that is worth more than the gap depends entirely on whether you receive advice and whether it changes what you do. SEBI's own investor material puts regular plans with beginners and hands-off investors and direct plans with do-it-yourself and cost-conscious ones. This calculator prices one side and takes no view on the other.
Does the expected return change the size of the gap?
Less than people expect, because the return moves both columns together. The gap is driven by the expense ratio difference, the amount and the horizon. Raising the assumed return does widen the gap in rupees, since the fee is charged on a larger balance, but it does not change which plan is cheaper or by roughly what proportion. The horizon does far more work: the same difference that costs a fifth of your investment over ten years costs more than all of it over twenty.
Sources
- SEBI Investor, regular and direct mutual funds, for the worked example of 1,00,000 rupees at 10% with 1.5% and 0.5% expense ratios, the statement that the difference can significantly impact wealth over ten years, and the suitability framing of beginners and hands-off investors against do-it-yourself and cost-conscious ones
- SEBI Master Circular for Mutual Funds, for the requirement that a direct plan carry a lower expense ratio excluding distribution expenses and commission, that no commission be paid from it, and that no fee head exceed the same head in the regular plan
- AMFI, total expense ratio of mutual fund schemes, the industry-wide published TER, updated monthly, which is where the two numbers this calculator asks for come from
- The totals in the table above are our own calculation on SEBI's example, compounded annually at 8.5% and 9.5% net of the stated expense ratios