Direct vs Regular Mutual Fund Expense Drag Calculator
Quantify how a seemingly small 0.50% to 1.25% Total Expense Ratio (TER) trail commission gap between Direct and Regular plans compounds over decades. Benchmarked against India’s published RBI Repo Rate (5.5%) and MoSPI Headline CPI Inflation (5.54%).
Sample 1.00% TER Spread Drag on ₹15,000/Month SIP (20 Years)
Direct Plan (0.60% TER) Corpus: ₹1,58,25,143 vs Regular Plan (1.60% TER) Corpus: ₹1,38,22,758. Total Commission Drag: ₹20,02,385 (12.7% of Direct corpus).
Frequently Asked Questions
What is the difference between Direct and Regular mutual fund plans?
Both invest in the exact same underlying portfolio managed by the same fund manager. Regular plans include ongoing distributor trail commissions inside a higher Total Expense Ratio (TER), while Direct plans have zero distributor commission.
Why does a 1% annual expense ratio difference reduce final wealth by 15% to 25%?
TER is deducted daily from fund NAV. You lose not only the annual 1% fee itself, but also all future compounding that those deducted rupees would have generated over 15 to 25 years.
What is a typical TER gap in Indian equity and index mutual funds?
Active Indian equity schemes commonly exhibit a 0.75% to 1.15% annual TER gap between Direct and Regular plans, while passive Nifty 50 index funds typically differ by 0.30% to 0.50%.