Direct Plans Vs Regular Plans in Mutual Funds

Reading Time: 6 minutes


Direct Plans in mutual funds are selling like hotcakes as a whole generation of new as well as old investors have gravitated towards them, these same investors start to confuse luck with skill in a bull market and it is only when the tide reverses, do they realize how ill-informed they were and do not know about the next action to take to get their portfolio in shape.

The last 18 months has given birth to a bunch of such investors and this is precisely the reason why hoard of investors have started moving away from regular mutual funds to direct mutual funds.

DIY (Do It Yourself) Investors fail to realize the fact that only a few wrong steps are enough to destroy wealth and it is always better to have someone who has got you covered and can guide you through your wealth creation journey.

Advice from distributors is not wanted during a bull run, the advice is only valued during a bearish market phase. In today’s blog, we list out certain points which shall make you re-consider your opinion on Regular Mutual Funds.


1.    Distributors help manage the emotions of their customers successfully

Successful Investing is more about controlling one’s behavior than knowledge, the Bull Run over the past 18-24 months coupled with SEBI relaxing the norms for companies wanting to start an Asset Management Company (AMC) has only made investing more intricate because now investors have many options to choose from but not enough patience to hold on to them.

The number of AMCs is bound to increase in the coming years which means there will be a whole host of schemes for the investor to select from, which in turn will lead to an increase in complexity and the noise.

In such a scenario the hard part will not just be selecting the right mutual fund but the ability to stick with that fund to maximize return. The human mind is not trained for the long-term approach; we are constantly on the lookout for opportunities that help us earn a quick money.

Even the best of schemes has rough patches and during such periods the investor may be tempted to move to schemes that are outperforming in that particular period but again no scheme can top the returns chart every time, this is when your distributor assures you to have conviction and stick with the plan rather than churning your portfolio consistently.

Distributors provide their clients with a personal touch and are always ready to lend an ear to their clients regarding their financial worries.

Take the classic example when the markets had hit rock bottom in March 2020, everyone thought that the sky was falling and was rushing to sell their equity holdings even at heavy losses but good financial advisors would have been able to pacify their clients and assured them to follow the strategy to buy and hold.

In a bull market, investors may be tempted to increase their allocation to equities but good financial advisors will keep their client’s greed in check and stress the importance of Asset Allocation.

2.    Distributors pro-actively manage their customer’s portfolio

Retail Investors constantly face time constraints and they often get busy earning more money forgetting they already have money invested which deserves their attention at regular intervals.

Nowadays, Time is a very scarce commodity and everyone seems to have less of it. To be honest, it is a little unfair to expect retail investors to be good at their profession/business as well as managing their money because the latter is a huge topic in itself and every human has limited bandwidth to deal with stuff.

I have seen many individuals who let money lay in their savings account for months or even years only because they “do not have the time to think about investment avenues”.

My only question is “If you can’t manage your finances, why not outsource it to someone who can help you?”

Financial Advisors come in handy especially in such a case because they always keep a tab on the developments taking place in their client’s portfolio because of which they inform the clients about regular re-balancing, exit options, new investment opportunities from time to time, making sure it aligns with the goals of the client.

The expense ratio in regular plans is higher in comparison to direct plans but the lakhs or even crores saved by the distributor for the client by taking pro-active steps many times goes unnoticed and makes over for the higher expense ratio charged in regular plans.

When we are sick or require legal counsel we approach professionals like doctors and lawyers respectively because we respect their skill set and acknowledge the fact that, we neither have the right skills nor the experience.

However, when it comes to managing money individuals behave very differently, we fool ourselves into believing that we know all the intricacies of investing and despise any professional help. But the fact is Financial Planners are professionals who can help you in your wealth creation journey.

Investing in mutual funds or preparing your financial plan without the right knowledge, guidance and expertise of a financial planner can be the same as trying to treat your sickness without the doctor’s help, only to realize that you took the wrong medicine!

Both can be disruptive in their own ways!

3.    Distributors like FinSim have “Skin in the game”

We at FinSim believe it is important to have Skin in the game thus we only recommend mutual funds to our clients in which we are invested.

[Note- Since every individual has a very different risk appetite and time horizon it is important to understand that we may not suggest the same funds depending on various factors; however, we assure you that we are invested in funds of a similar risk category]

We are not one of those distributors who purely chase commissions rather our main focus is to compound the wealth of our clients over longer periods by staying invested in the funds which we truly believe are fundamentally strong enough and fit well in the overall portfolio of the client.

Since we have our skin in the game, we make sure that our client’s interests are protected and looked after.

4.    Leverage the Expertise of a distributor

Distributors are in regular touch with the market and are aware of the regular developments taking place which in turn helps them to narrow down on the funds that will best suit their client best.

Distributors can help investors select the right mutual funds after considering a whole host of factors like Risk appetite, Time Horizon, etc. along with the amount to be invested in lump sum or SIP to reach the financial goal.

Distributors also analyze mutual funds based on various financial ratios like beta, alpha, standard deviation along with past returns, expense ratio, fund manager, and many other metrics, these terms may seem foreign for a retail investor thus it is better to use the expertise of the distributor in your favor.

A word of caution, there are various distributors out there who hardly know much about mutual funds but they are only in this business of earnings commission, beware of such distributors, and the best way to identify them is by asking them as many questions as possible.

Distributors not only suggest the right mutual fund scheme for you but they also help you with the entire process of investing, right from the KYC process till the time the investment has been made.

To put it simply, the distributor will do all the hard work and the client need not worry much about the same.


The whole world might be talking about direct plans but that does not mean you have to follow the herd, you have to review all the points we mentioned above and decide after careful thought.

Regular Plans just like everything else have their pros and cons but as an investor, if you feel the pros outweigh the cons then you shall go for it.

At FinSim, we believe that regular plans are a really good option for investors because the value added by the distributor helps save boatloads of time and money in the long run

If you have any queries relating to the article or would want to add your thoughts, feel free to let us know in the comment section and we will get back to you as soon as possible.

If you want to know more about our services then please check out our website or contact us.

Leave a Comment