Investors often wonder how much extra money they can earn by choosing direct plans over regular plans in mutual funds. When investing ₹5,000 monthly through a Systematic Investment Plan (SIP) in the five largest midcap funds, direct plans earned between ₹66,194 and ₹1,09,050 more than regular plans over 10 years. This difference comes from lower expense ratios in direct plans, which leads to better compounding returns, even though both plans hold the same portfolio.
- Direct plans have lower expense ratios than regular plans.
- Over 10 years, direct plans earned 4.4% to 7.6% more than regular plans.
- Motilal Oswal Midcap Fund direct plan showed the highest absolute gain difference of ₹1,09,050.
- Axis and Kotak Midcap Funds had the largest percentage difference at 7.6% each.
- Both plans have identical portfolios, managed by the same fund managers.
What causes the difference between direct and regular plans?
Both direct and regular plans invest in the same stocks and sectors, follow the same investment mandate, and are managed by the same fund managers. The key difference lies in the expense ratio. Direct plans have lower expense ratios because they do not include distributor commissions or fees. This lower cost means more money stays invested, allowing the investment to grow faster through compounding over time.
How much more did direct plans earn over 10 years?
Over a 10-year period, the direct plans of the five largest midcap funds outperformed their regular plan counterparts by significant margins. For example, the Motilal Oswal Midcap Fund’s direct plan earned ₹1,09,050 more than its regular plan, a 7.1% higher return. Kotak Mid Cap Fund’s direct plan earned ₹1,06,279 more (7.6%), and Axis Midcap Fund’s direct plan earned ₹1,03,236 more (7.6%). The Nippon India Growth Mid Cap Fund and HDFC Mid Cap Fund direct plans also showed gains of ₹77,261 (5.0%) and ₹66,194 (4.4%) respectively.
Do direct plans perform better in shorter periods too?
Yes, direct plans consistently outperform regular plans in every time period, not just over 10 years. The difference in returns grows with time because the savings from lower expenses compound on an increasing investment corpus. For example, over five years, the difference in gains from direct plans ranged between ₹8,000 and ₹12,600 on a ₹5,000 monthly SIP.
Are the portfolios in direct and regular plans identical?
Yes, both plans hold exactly the same number of stocks and sectors, with identical portfolio price-to-earnings (P/E) and price-to-book (P/B) ratios, average market capitalisation, and risk measures such as standard deviation and beta. For instance, Motilal Oswal’s direct and regular plans both hold 30 stocks across 15 sectors, with a portfolio P/E of 52.48 and P/B of 8.81. The only difference is the net asset value (NAV), which reflects the returns after expenses.
What are the current sizes of these midcap funds?
| Fund | Assets Under Management (AUM) in ₹ Crore (Sept 30, 2026) |
|---|---|
| HDFC Mid Cap Fund | 1,01,856.06 |
| Kotak Mid Cap Fund | 66,613.26 |
| Nippon India Growth Mid Cap Fund | 50,176.01 |
| Motilal Oswal Midcap Fund | 40,207.50 |
| Axis Midcap Fund | 33,527.80 |
What should investors take away from this comparison?
For investors planning to invest through SIPs in midcap funds, choosing direct plans can lead to significantly higher returns over the long term. Even though both direct and regular plans invest in the same portfolio, the lower expense ratio of direct plans allows the investment to compound faster. Over 10 years, a ₹5,000 monthly SIP in direct plans of these five funds earned between ₹66,194 and ₹1,09,050 more than regular plans, which is a 4.4% to 7.6% higher return. This difference can make a meaningful impact on wealth creation over time.
