Why sticking to regular plans cost an investor Rs 20 lakh

I recently met an investor - let's call him Mr. Regular - who had been diligently investing in mutual funds for years. By 2010, he'd built a corpus of about Rs 1.5 crore, a testament to his disciplined approach and patience. Fast forward to today, his investments have grown substantially, but during a recent discussion, we uncovered a startling fact: despite doing almost everything right, Mr. Regular missed out on roughly Rs 20 lakh in potential gains. The reason? He never switched his regular plan mutual funds to direct plans when the opportunity arose. Back in 2013, mutual fund houses began offering direct plans for all schemes . This was a quiet revolution. Under direct plans, investors could invest without the hidden commission costs that regular plans pay to distributors. In practice, this means the expense ratios (annual fees charged by the fund) on direct plans are about 0.5 per cent to 1 per cent lower than on regular plans. At first glance, a one-percent difference might sound trivial. But as Mr. Regular's story shows, small cost differences compound into large amounts over time. Think of it this way: on a Rs 1.5 crore portfolio, even a 0.5 per cent reduction in fees saves Rs 75,000 in a year. If it's closer to 1 per cent, that's about Rs 1.5 lakh saved in one year - money that stays invested and keeps growing for you. Over 10 or 12 years, these yearly savings and the extra growth on them can easily snowball into tens of lakhs. In Mr. Regular's case, the lack of that extra push shaved off what could have been an additional Rs 20 lakh in his wealth — even if he had switched in a phased manner. When I asked Mr. Regular why he hadn't switched to direct plans, his answers were honest and revealed a mindset shared by many investors. Inertia was the first thing he mentioned - essentially, "everything seemed to be working fine, so why bother changing it?" He also admitted to a bit of apprehension about the process of s

This article was originally published on May 05, 2025.