The share of direct plans has steadily increased over the past five years, but most investors continue to invest through regular plans despite the higher costs.
According to the SBI Funds Management IPO RHP, direct plans accounted for 49.1% of the mutual fund industry’s assets under management (AUM) as of March 2026, up from 45.4% in March 2021. However, regular plans still hold the larger share of the industry’s AUM.
The gap is even more pronounced among individual and institutional investors. While direct plans make up 77.7% of institutional investors’ mutual fund AUM, the corresponding share for individual investors is just 30%.
Here’s what experts have to say on this.
Why are retail investors still choosing regular plans?
Experts say the difference is not just about costs but also about access to advice, investor behaviour and long-term discipline.
“Even though direct plans have lower expense ratios, many individual investors continue to choose regular plans because they are first-generation mutual fund investors who entered the market through bank relationship managers or mutual fund distributors,” said Adil Chacko, Executive Director, Anand Rathi Wealth.
He added that shifting to direct plans requires investors to independently select funds and manage portfolios.
“Looking at the holding periods for SIP AUM, 33% of SIP assets in regular plans had remained invested for more than five years, compared with only 19% in direct plans. For many investors, the value of staying invested through market cycles is likely to outweigh the small savings in costs offered by a direct plan,” Chacko explained.
Nilesh D Naik, Head of PhonePe Mutual Funds, believes the debate has become overly focused on expense ratios.
“When direct plans were introduced in 2013 alongside RIA regulations, the objective was clear: investors could either use a mutual fund distributor and compensate them through commissions, or engage an RIA, pay an advisory fee, and invest in direct plans,” he said.
Naik added that many investors today still rely on MFDs for advice and assistance and hence continue to invest in regular plans.
Naik pointed to several industry trends—including short holding periods in equity funds, a SIP stoppage ratio of around 100%, and investors chasing popular themes—to argue that the bigger challenge is investor behaviour rather than product costs.
“These aren’t product problems. They’re advice and behaviour problems. The industry should focus on strengthening the MFD/RIA ecosystem rather than fixating on how investors can skip advice to save a few basis points,” he added.
Nitin Agrawal, CEO, Mutual Fund by InCred Money, said the debate extends beyond costs, with the distribution network playing a crucial role in the industry’s growth.
“The distribution network has been a key backbone for the multi-fold growth that the industry has witnessed since inception. Over time, distributors have transformed from a pure transaction facilitator to an entry point into the asset class itself through constant education and reach,” Agrawal added.
Who should choose direct plans?
Naik said direct plans are appropriate for two broad categories of investors. “First are those who are availing RIA’s advisory services and second are the highly evolved investors who have the time, resources and expertise to analyse investments, track markets and manage their own money as institutional investors do,” he explained.
Agrawal believes that there is no one-size-fits-all decision. “Direct plans are best for investors who understand asset allocation, can evaluate funds across categories and do not require external guidance to stay invested during volatile markets,” he added.
What key points investors should consider while making the decision?
“The choice between direct and regular plans should not be based only on the expense ratio,” Chacko mentioned.
Agrawal said investors should ask themselves three key questions before choosing a plan: whether they have the knowledge and time to manage their own portfolio, access to quality advice, and the ability to handle behavioural biases during market downturns.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
About the Author
Sheetal Goel is a Content Producer at Livemint, where she covers corporate developments, personal finance, business trends, markets, and SEBI-related updates. She focuses on simplifying complex financial concepts and presenting them in a clear, reader-friendly manner, thereby helping audiences better understand investment trends, personal finance, and market developments. Her writing focuses on making finance more accessible to everyday readers while maintaining clarity, accuracy, and relevance.
She holds a degree in Economics (Hons.) along with an MBA in Finance, which has helped her develop a strong foundation in financial analysis, market understanding, and business reporting. Before joining journalism, she worked with finance and broking firms, where she closely followed market developments, investment strategies, and evolving industry trends. This practical exposure strengthened her understanding of financial markets. She has also written content across multiple formats and platforms, including YouTube, LinkedIn, and Instagram.
Over time, she has developed expertise in covering market-linked stories, investor-focused topics, and regulatory updates in a simplified yet informative style. She also enjoys reading and listening to Hindi poetry, reflecting her appreciation for literature and creative expression beyond the world of markets and numbers.