You did everything right. You started a SIP, picked a solid fund, and stayed invested through the scary months.
Here’s the uncomfortable part: there’s a real chance you’re in a version of that same fund that quietly pays someone else a cut every single year out of your money. Same manager. Same stocks. You just walked through the more expensive door without knowing there was a cheaper one right next to it.
The two doors
Every mutual fund in India comes in two versions: Regular and Direct. Same fund, same portfolio, same performance before costs. The only difference is how you bought it.
Buy through a distributor, agent, bank or most popular apps, and you’re almost certainly in a Regular plan, where the fund house pays a commission to that middleman every year, for as long as you stay invested.
Buy directly from the fund house and you’re in a Direct plan, no middleman, no commission.
That commission isn’t a bill you can see. It’s baked silently into the fund’s running cost and skimmed off your returns before they ever reach you. You’d never know unless you went looking.
The number that should make you pause
Say you invest ₹20,000 a month for 20 years, and the fund earns about 12% a year before costs. The only thing we’ll change is which door you walked through.
- Direct plan: your money grows to roughly ₹2 crore.
- Regular plan: after that ~1% commission quietly eats your returns every year; the same SIP in the same fund grows to roughly ₹1.75 crore.
That’s a gap of about ₹25 lakh more than half of everything you actually invested, gone not to a crash or a wrong fund, but to a 1% cut you couldn’t see. That’s compounding working in reverse: a small leak doesn’t stay small because every year it comes out of a bigger base.
What to actually do
You don’t need to panic-sell anything tomorrow. You need to look.
Pull up any fund statement and find the word “Direct” or “Regular” in the scheme name; it’s written right there. If it says Regular, you now know there’s a cheaper twin of that exact fund.
For anything new, default to Direct. For what you already hold, do a calm, planned review rather than a rushed switch, since exit loads and tax can apply when you move.
And if you want someone in your corner for that review, choose an adviser whose income comes from a fee you can see, not a commission baked into the products they put you in. When the only person who pays your adviser is you, their interests and yours finally point the same way.
That 1% isn’t small. Over a lifetime of investing, it’s one of the biggest.
Disclaimer: Krishnam Raju Datla is a SEBI-registered Investment Adviser (INA000021003). This article is for educational purposes only and is not investment advice or a recommendation to buy, sell, or hold any security or scheme. The figures are illustrative assumptions to explain a concept, not a forecast or promise of returns; actual costs and returns vary by fund and over time. Investments in securities markets are subject to market risks; read all related documents carefully. Past performance is not indicative of future results.
Krishnam Raju Datla · SEBI RIA INA000021003