In Indian mutual funds, regular plans include ongoing distributor commissions (typically 0.50% to 1.50% annually) deducted daily from your scheme's Net Asset Value (NAV). Direct plans eliminate this intermediary friction, compounding directly to your terminal corpus.
Because mutual fund returns compound exponentially, a 1.00% difference in annual Total Expense Ratio (TER) does not mean a 1% loss in terminal wealth. Over 20 years, a 1% fee difference forfeits approximately 15% to 22% of your entire portfolio corpus.
| Tenure | Total Invested | Direct (12.5% Net) | Regular (11.5% Net) | Wealth Lost to Drag |
|---|---|---|---|---|
| 10 Years | ₹12,00,000 | ₹24,40,000 | ₹22,90,000 | ₹1,50,000 |
| 15 Years | ₹18,00,000 | ₹53,20,000 | ₹48,10,000 | ₹5,10,000 |
| 20 Years | ₹24,00,000 | ₹1,09,90,000 | ₹96,50,000 | ₹13,40,000 |
| 25 Years | ₹30,00,000 | ₹2,21,40,000 | ₹1,87,30,000 | ₹34,10,000 |
Read our in-depth research breakdown: Direct vs Regular Mutual Funds: The Compounding Drag of Distributor Commissions.