When investing in mutual funds, investors usually choose between regular mutual funds and direct mutual funds. While both invest in the same underlying portfolio, the way investors access and manage them is different.
Regular mutual funds are commonly chosen by investors who prefer guidance, support, and assistance throughout their investment journey. Understanding what regular mutual funds are, how they work, their costs, and their advantages helps investors decide whether this option suits their needs.
What Are Regular Mutual Funds
Regular mutual funds are mutual fund schemes purchased through a mutual fund advisor. These schemes include distributor commissions as part of their expense ratio.
Regular plans are clearly labelled as “Regular” in the scheme name and are offered alongside direct plans of the same fund.
For example:
- ABC Equity Fund – Regular Plan
- ABC Equity Fund – Direct Plan
Both plans invest in the same stocks or bonds. The difference lies in cost structure and investor support.
Also read: Direct vs Regular Mutual Funds
How Regular Mutual Funds Work
When you invest in a regular mutual fund:
- You invest through a distributor, advisor, or platform
- The distributor assists in fund selection based on suitability and investor requirements.
- Distributor commission is paid by the fund house
- This commission is included in the fund’s expense ratio
- You receive units based on the applicable NAV
Regular mutual funds are designed for investors who want professional support while investing.
Key Features of Regular Mutual Funds
Access to Guidance
Regular mutual funds come with distributor or advisor support, which helps investors understand fund categories, risk levels, and suitability.
Assistance with Transactions
Distributors help with SIP setup, redemptions, switches, and documentation.
Same Portfolio as Direct Plans
Regular and direct plans invest in the same underlying assets. Only the expense structure differs.
Ease for Beginners
Investors new to mutual funds often find regular plans easier to manage due to available support.
Costs Involved in Regular Mutual Funds
The main cost difference between regular and direct mutual funds is the expense ratio.
Expense Ratio Explained
The expense ratio includes:
- Fund management fees
- Administrative expenses
- Distributor commission
Because distributor commission is included, regular mutual funds have a slightly higher expense ratio than direct plans.
This higher cost does not mean poor performance. It reflects the cost of guidance and service provided.
Regular Mutual Funds vs Direct Mutual Funds
| Aspect | Regular Mutual Funds | Direct Mutual Funds |
| Distributor involved | Yes | No |
| Expense ratio | Higher | Lower |
| Advisory support | Available | Not included |
| Investor responsibility | Shared | Fully self-managed |
| Suitable for | Guided investors | Self-directed investors |
Choosing between the two depends on how much guidance you want, not just cost.
Advantages of Regular Mutual Funds
Professional Guidance
Regular mutual funds provide access to experienced distributors or advisors who help investors make informed choices.
Behavioural Support
During market volatility, guidance helps investors stay disciplined and avoid emotional decisions.
Convenience
Regular plans simplify investing by handling operational and documentation-related tasks.
Suitable for Long-Term Planning
For investors who want ongoing support, regular mutual funds offer comfort and structure.
Limitations of Regular Mutual Funds
Higher Expense Ratio
Costs are slightly higher compared to direct plans.
Dependence on Advisor Quality
The quality of guidance depends on the distributor or advisor you choose.
Understanding both advantages and limitations helps set realistic expectations.
Who Should Consider Regular Mutual Funds
Regular mutual funds may suit:
- First-time investors
- Investors who prefer guidance
- Those uncomfortable making independent fund choices
- Long-term investors seeking support and discipline
They may not suit investors who want to manage everything on their own and minimise costs.
Taxation of Regular Mutual Funds
Taxation rules for regular mutual funds are the same as direct mutual funds. Tax depends on:
- Fund type (equity or debt)
- Holding period
- Applicable tax laws at the time of redemption
There is no separate tax treatment based on plan type.
Common Mistakes Investors Make with Regular Mutual Funds
- Choosing plans without understanding costs
- Depending fully on advice without learning basics
- Ignoring periodic portfolio reviews
- Comparing only returns without considering support value
Awareness helps investors get the best from regular plans.
When Guidance Makes Sense
Not all investors want to track markets, study fund categories, or rebalance portfolios on their own. For such investors, regular mutual funds offer structured support.
If you prefer learning while investing and want clarity without handling everything independently, speaking with a qualified mutual fund advisor can help. The inXits team also provides educational support and 24×7 free consulting for investors who want clarity before choosing between regular and direct mutual funds.
Conclusion
Regular mutual funds offer a guided way to invest, combining professional support with structured investing. While they come at a slightly higher cost than direct plans, many investors find value in the assistance and discipline they provide.
The choice between regular and direct mutual funds should depend on your comfort with managing investments, not only on expense ratios. Understanding your needs helps you choose the option that aligns best with your long-term goals.
FAQs
1. What is a regular mutual fund
A regular mutual fund is a scheme purchased through a distributor or advisor, with commissions included in the expense ratio.
2. Are regular mutual funds more expensive than direct funds
Yes, they usually have a higher expense ratio due to distributor commissions.
3. Do regular mutual funds give lower returns
Returns depend on market performance. The difference comes from higher costs, not portfolio quality.
4. Are regular mutual funds suitable for beginners
Yes, especially for beginners who want guidance and support.
5. Can I switch from regular to direct mutual funds
Yes, switching is possible but may involve tax implications depending on holding period.
Mandatory SEBI Warning & Disclaimer
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI, membership of BSE and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
The securities quoted above are for illustration only and are not recommendatory
