Direct mutual funds are cheaper
So why would anyone choose Regular funds?
As a Certified Financial Planner and an MFD, I hear this question often, and it’s a valid one
Yes, Direct plans have lower expense ratios
But investing success depends not just on cost, but on planning, asset allocation, and behaviour over time
That’s where the discussion usually becomes incomplete
Real-life example #1: Random Investing Dilutes Returns
At his request, I recently reviewed the mutual fund portfolio of a salaried Armed Forces professional who was investing only through Direct mutual funds
What I saw was quite common:
* 25+ mutual fund schemes
* Several thematic and sector funds
* No clear asset allocation
* No linkage to goals
It appeared that the investments were made over time based on tips, news, and past returns
Despite being invested for nearly 5 years, the portfolio delivered an annualised return of around 8–9%, below market returns for the same period
The issue was not the Direct funds
It was random investing without a plan
Too many schemes, especially thematic ones, without proper allocation:
* Increased risk instead of reducing it
* Created overlap
* Made monitoring and rebalancing difficult
* Diluted overall returns
A carefully designed portfolio with:
* Asset allocation aligned to the investor’s risk profile
* Clear linkage to goals
* Just a few(5-7) well-chosen core funds
* Minimal or no thematic exposure
could reasonably have delivered 14–15% XIRR over the same period, simply by being focused and disciplined.
More funds did not mean better diversification
They only added complexity
Real-life example #2: Discipline matters more than cost
Another investor chose Direct funds to save costs and started investing confidently
During a market correction:
* SIPs were stopped “temporarily”
* Equity exposure was reduced
* A restart was planned once markets felt stable
* That pause lasted much longer than expected
When markets recovered, returns lagged badly, not because of expense ratios, but because discipline broke at the wrong time
The cost of missed recovery was far higher than the savings from Direct plans
The Real Takeaway
Direct vs Regular mutual funds are not about right or wrong; it’s a suitability decision
Direct funds work only if you:
* Understand asset allocation
* Avoid thematic or return-chasing temptations
* Control emotions
* Stay disciplined without guidance
For most investors, this is hard to sustain
Regular funds add value where it matters most:
* Structure and clarity
* Behavioural discipline during volatility
* of action over time
Regular plans are not about “paying extra”
They are about avoiding expensive mistakes
Lower cost helps, but it rarely compensates for poor structure, emotional decisions, or missed rebalancing
In long-term investing, behaviour and discipline matter far more than saving a few basis points
Before choosing, ask yourself honestly
Do I only need a platform, or do I also need guidance?
That answer usually makes the decision clear
#investwisely #mutualfunds