The report shows that over a 10-year holding period, more than 80% of equity mutual fund schemes delivered lower investor value in regular plans compared with direct plans of the same scheme. In around 20% of the schemes analysed, the difference in investor value exceeded 50%.
Mutual funds, however, continue to provide a path for wealth creation over the long term, as returns are market-linked and benefit from compounding. The study notes that investors in both regular and direct plans can accumulate wealth over time, but differences in cost structures may affect the extent of these gains.
The report indicates that differences in total expense ratios (TERs) between regular and direct plans tend to widen over time. Regular plans include distributor commissions, resulting in higher ongoing costs. While the annual impact of these costs may appear limited, the study finds that their cumulative effect becomes more visible over longer investment periods.
The divergence between the two plan types is also observed over shorter horizons. Over a five-year period, 53% of schemes showed a difference of 15% or more in investor value between regular and direct plans. Over longer durations, the difference increased further, reflecting the compounding impact of expenses.
The study describes the return gap as structural, given that regular and direct plans invest in the same underlying portfolios and are subject to the same market conditions. As a result, differences in investor outcomes are primarily associated with cost structures. The report adds that although longer holding periods generally support compounding, higher expenses can moderate the extent of those benefits.
Investor holding patterns are also referenced in the study. Data as of March 2024 show that 21.2% of investments in regular plans were held for more than five years, compared with 7.7% in direct plans, indicating that regular plans continue to account for a substantial share of longer-term investments.
Commenting on the findings, Rajani Tandale, Senior Vice President – Mutual Fund at 1 Finance, said that cost differences sustained across market cycles can influence long-term outcomes. She added that while longer holding periods generally support compounding and wealth creation, higher embedded costs may reduce the overall impact.
The study is based on an analysis of AMFI NAV data for direct-growth and regular-growth equity mutual fund schemes across major categories. It assumes a uniform ₹100 investment from the same start date to isolate the impact of cost differences. Schemes with at least five years of history were used for medium-term analysis, while schemes with 10 years of data informed longer-term observations.
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First Published: Jan 7, 2026 8:22 AM IST