India’s mutual fund industry surpassed a 12.2% year-on-year growth in its Assets Under Management (AUM), crossing ₹73.73 Lakh Crore in March, 2026. As the world faced drastic volatility, rising oil prices and an uncertain geopolitical environment, Indian investors held steady with their mutual fund portfolios. Despite the surge in inflows, the SIP stoppage ratio in mutual funds reached 100% in March 2026, higher than the previous month. This means, for every SIP that is initiated in the mutual fund industry, there’s one that is being stopped or discontinued.
As markets turn red, investors lose confidence and leave their SIPs. However, the true benefit of compounding is evident only when investors survive the downturns and remain invested for the long term. Market conditions will always be uncertain. What you can control is the structure of how you invest. Direct vs regular SIP is one of those structural choices that compounds quietly over decades.
What is a SIP?
A Systematic Investment Plan (SIP) is an appropriate and commonly used mode of investing in mutual funds. Through an SIP, investors invest a fixed amount in regular intervals into a mutual fund scheme, and secure the fund’s units in proportion to its prevailing Net Asset Value. SIPs are disciplined modes of long-term investing in mutual funds. Through its key benefits and discipline, SIPs can help accumulate and build a predetermined corpus over the long-run.
What Constitutes a Direct SIP?
A direct SIP invests directly in the scheme provided by the asset management company through physical visits, Mutual Fund (MF) Central, or the official fund house website. There will be no middleman, third-party, or agent involved in this process. Since the process is direct, the costs involved in it are reduced.
What Constitutes a Regular SIP?
A regular SIP is processed through third-party aggregators, brokers, or agents. Due to the presence of these parties, there are additional costs borne by the investor.
Direct SIP vs Regular SIP
A direct SIP and a regular SIP invest in the same fund, with different routes. In a direct SIP, investors invest directly with the fund house, while a regular SIP involves an intermediary. This difference affects the cost structure, which in turn impacts long-term returns.
| Basis | Direct SIP | Regular SIP |
| Investment Route | Direct with AMC | Through broker/agent |
| Intermediary | Not involved | Involved |
| Expense Ratio | Lower | Higher |
| Commission | Not applicable | Included |
| Returns | Slightly higher (net) | Slightly lower (net) |
| Advisory Support | Self-managed | Advisor-assisted |
| Suitable For | Informed investors | Beginners seeking guidance |
Expense Ratio: Core Difference & Impact
The expense ratio is the yearly subscription a mutual fund charges to manage your investment. It is deducted from the fund’s returns before they reach you, which means you never see it as a line-item deduction, but you feel it over time.
Unlike a regular plan, a direct plan has no distributor commission built into the charge. That difference is generally between 0.5% and 1.5% annually, based on the fund category. While this may seem small in isolation, in the long-term it is highly impactful.
Sample Return Comparison
As an example, consider Motilal Oswal Large Cap Fund with a direct expense ratio of 0.80%, and a regular plan’s expense ratio of 1.93%.
This shows an expense ratio SIP difference of 1.13% per year. It compounds alongside your corpus, quietly working against your returns every single year.
The table below shows the growth of a ₹5,000 per month SIP over 20 years and the expected gross return of 12% per annum.
| Direct SIP | Regular SIP | |
| Expense Ratio (Motilal Oswal Large Cap) | 0.80% | 1.93% |
| Effective Net Return | ~11.20% | ~10.07% |
| Estimated Corpus After 20 Years | ~₹44.85 lakh | ~₹38.63 lakh |
| Difference in Final Corpus | — | ~₹6.22 lakh less |
A difference of 1.13% in annual expense ratio translates to a gap of over ₹6.22 lakh on a ₹5,000 monthly SIP over 20 years. The total amount invested in both cases is identical — ₹12 lakh. The only variable is the route chosen at the start.
Control vs Convenience: The Investor Experience
A direct SIP places full responsibility on the investor. Fund selection, portfolio review, rebalancing decisions, tax-loss harvesting — all of it is self-managed. This is unsuitable for investors who do not have knowledge related to investments.
A regular SIP, by contrast, comes with an advisor or distributor in the loop. The distributor earns a trail commission for continued service. In theory, that service includes guidance on fund selection, goal alignment, and behavioural coaching during market downturns.
Thus, there lies a tradeoff between control and convenience. Investors seeking guidance may find regular plans more suitable, while non-beginners are at an advantage using direct plans. For many investors, having someone in their corner during a sharp correction is worth the additional cost.
Suitability: Who Should Choose Which?
For each of the direct and regular SIPs, the suitability is discussed below:
Direct SIP is suited for investors who:
- Understand mutual fund categories and can independently evaluate fund performance.
- Have a well-defined asset allocation strategy, with the discipline to stay consistent.
- Are comfortable monitoring their portfolio without external prompts.
- Are willing to invest time in being aware of fund-level changes.
Regular SIP is suited for investors who:
- Are new to mutual funds and still building financial literacy
- Prefer having an advisor manage fund selection and portfolio reviews.
- Are likely to make emotional decisions during market fluctuations.
- Have complex financial goals that benefit from structured, ongoing advice.
Switching: How to Move from Regular to Direct SIP
Switching from a regular plan to a direct plan is a simple process, but it involves a few steps that you must understand.
Note that a switch is treated as a redemption from a regular plan and a new purchase in the direct plan. This has tax implications. Therefore, any gains realised at the time of switching are subject to capital gains tax based on your holding period and the nature of the fund.
However, you can follow these steps to change from a regular to a direct plan:
- Visit the AMC’s official website or MF Central (mfcentral.com) and log in using your PAN and folio number.
- Select the regular plan you wish to switch from and choose the matching direct plan of the same scheme.
- Confirm the switch — units will be redeemed from the regular plan and reinvested in the direct plan at the applicable NAV on the date of processing.
- Update your SIP mandate separately if you want future installments to flow into the direct plan.
Rising Adoption of Direct Plans
The shift toward direct plans has been consistent and measurable. As of early 2026, direct plans account for nearly 49% of the mutual fund industry’s total AUM. Direct plans have witnessed a steady surge in popularity over time. This is primarily driven by digital platforms, increased financial awareness, and the availability of free investment tools.
Platforms such as MF Central, SEBI’s MF Utilities, and several fintech applications have significantly reduced the friction involved in investing directly. What once required a physical visit to a fund house or a call to a registrar can now be completed in minutes on a smartphone.
Conclusion
Mutual funds offer significant benefits in the form of diversification and long-term wealth building. Therefore, choosing the correct mode of investing in a mutual fund scheme is important. A regular SIP mode will provide guidance on mutual fund aspects, while a direct SIP mode will eliminate additional costs. The decision should be based on your level of financial literacy and your honest assessment of whether you will remain invested through market downturns without support.
FAQ’s
A direct SIP is invested directly with the AMC, with no intermediary involved. A regular SIP is routed through a broker or distributor who earns a trail commission, embedded in the fund’s expense ratio, making it higher than the direct plan.
The return difference depends on the expense ratio gap between the direct and regular plans of a specific fund. On average, this gap ranges from 0.5% to 1.5% annually.
Direct SIP offers higher net returns due to a lower expense ratio, but with no additional guidance. For investors with the understanding and discipline to do this, direct is the more cost-efficient choice.
First, log in to the fund house’s official website or MF Central using your PAN. Select the regular plan folio and switch to the corresponding direct plan. Note that this is treated as a redemption and fresh purchase.
