Returns Comparison 2016: Direct Mutual Fund vs. Regular Mutual Fund

Direct mutual fund plans are those that do not have a trail commission component and should be purchased 'directly'* from an AMC. These plans were introduced on 1st Jan. 2013. In this post, the returns of direct mutual funds are compared with 'regular' mutual funds (ones sold by distributors, banks, online portals etc.).

(*) This is changing rapidly! See below.

This exercise was also carried out last year: Direct Mutual Fund Option – The Second Anniversary Report.

I maintain an Excel file where I maintain SIPs of a few regular and direct funds. I present below the 3-year, 2-year, and 1-year SIP returns of those funds.

The SIP is for Rs. 5000 a month and the XIRR (the equivalent of CAGR for multiple investments) is calculated on the day the 12th (1Y), 24th (2Y) and 37th (~3Y) installments are completed.

The difference in returns bet direct and regular funds can vary widely among fund to fund. This is because expense ratio varies from fund to fund. So does the extent of commissions.

Even for the same fund, the difference will not be constant, since the expense ratio changes with AUM (decreases with increase in fund size).



This XIRR difference will settle down to a constant value. Remember that although the difference is small, it is for each year of investment. Suppose the difference is expense ratios is about 0.5% and the investment duration is 10 years, the approximate difference in corpus will be of the order of

(1+0.5%) x (1+0.5) x ...... multiplied ten times.


If you like some projections into the future, try this: Illustration: Direct Mutual Funds vs. Regular Mutual Funds

Using Value Research SIP Returns Tool

You can get the above information for all funds using the Value Research SIP returns tool.

  1. In the VR main page navigate to the bottom left to Tool --> SIP Returns
  2. Go to fine tune your fund selection and uncheck direct plans, 3,2 and 1-star funds
  3. Select the fund category you want and update fund list.

You will get this


This can be used to compare 1-year and 3-year SIP return differences.


This is the 3-year return difference plotted against the 1-year return difference. The 3-year return  is 1/3rd dependent on the 1-year return. The graph only illustrates that the return difference will more or less remain constan if low and will decrease if noticeably high. It is the corpus difference that will grow more and more as shown in the above table.

You can download the full processed list with data from VR as an Excel file: VR-SIP-returns-direct-Jan-2016.xls


If you are a DIY investor,direct is the ovious choice. If you are an investor in the need of professional help, then too direct is the obvious. Just that you need to consult a SEBI registered fee-only financial planner before that. Paying for financial help is commonsense. However, it is also commonsense that we should be the only one paying the adviser and not the AMC by taking a piece from our investment gains.

The MF Utility is now operational and once invest in direct funds of 25 amcs in one portal. Soon we will have a slew of robo-advisory direct mutual fund portals available.

All I can say is,


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12 thoughts on “Returns Comparison 2016: Direct Mutual Fund vs. Regular Mutual Fund

  1. Rohit Modi


    I m a regular follower of your blog.
    I m also trying to setup a blog, so needed a small help from you, if you don't mind.
    Your post lands in my mail box with just initial para, There after I get a link to read more if I m interested. (Read more of this post)

    This option is available in Free WordPress blog account, or u can do it because u have taken any premium plan.

    1. freefincal

      There are only 2/3 of them. In order to write about them, I need to know enough about the FMCG sector- about valuations and outlook. I do not know enough to write about this.

  2. Rohit Modi

    I hav another question which is not linked with this particular post. But I dont know where I can post to hav your advice, as I want to sail in the same direction of yours.

    Can blogging be a viable part time career option ?? I m asking this because, a little money gives an extra gentle push for pursuing hobby, though making money is not the target.

    Young readers like me, would appreciate your post on this, "Sharing knowledge, also pays well ???"

    1. freefincal

      "Can blogging be a viable part time career option ??" Depends on what you want to blog about and how good you are at it. Please note that many bloggers make money by writing crap that people search for: top best mutual funds,top term plans etc. So I suggest you forget about generating income first and establish a blog and community of followers. Then think about income.

  3. Vivek

    Dear Sir,
    Very informative article. I am a new follower to your blog. I just want to know something about security transaction tax, and P/E ratio. Can you pl post link related to this topic on you blog.

  4. Sanoop

    Hi Pattu,
    I have been following your post for quite sometime and this direct vs regular mutual fund post caught my attention. I have a question, given that Banks who act as advisers recommending Mutual Funds to clients and therefore receive commissions from AMC, is there any extra benefits that they provide clients which can justify them receiving commissions?

  5. Jig

    i want to pour cash in ongoing sip funds.



    Out of which i should pour. confused between large cap multi cap or mid cap funds pouring.
    please dont angry mr pattu. 🙂 Guru your 2 cents and idea how to pour during fall will surely help.


Do let us know what you think about the article