Are you paying the regular-plan fee without noticing?
If your statement says Regular, you are in the costlier plan of the same fund. Direct and regular hold the same portfolio. The difference in expense ratio is what the regular plan pays a distributor, and it is deducted every year, including years the fund falls. For a SIP you mean to hold a long time, that gap is a large sum. You can type your own expense ratios into the expense-gap illustration. It is arithmetic on the numbers you enter, not a forecast of any scheme.
Where the fee sits
The scheme document lists a direct-plan expense and a regular-plan expense. The gap is not a one-time commission you can see on the contract note. It is taken inside the NAV, so the regular NAV grows a little less each day. A platform that only shows regular plans is charging you this way even when the screen says the order is free. Find the plan name on the account statement, not on the marketing page of the app. If it says Direct, you are not paying that distributor gap. If it says Regular, write down both expense ratios from the latest factsheet and the amount you already hold.
Switching is a sale
Moving from regular to direct in the same scheme is a redemption and a fresh purchase. The units you sell can attract exit load if they are still inside the load period, and they can attract tax. Each SIP instalment has its own purchase date, so part of the holding can be short-term and part long-term in the same click. Stopping the next debit is not the same as selling. Read stop a SIP or redeem the units before you move a large balance in one afternoon. Do the switch when the fee you will keep paying is the problem and you have looked at the tax and the load. Do not switch because an app sent a notification on a down day.
Who can ignore the direct plan
Ignore it if a person you pay separately is doing work you would otherwise skip, you know you are paying them through the regular plan, and you have compared that cost with a flat fee. Ignore the panic if you are about to need the money and the exit load plus tax is larger than a year or two of the fee gap. In that case, stop new regular SIPs, start the direct plan for new money, and leave the old units until the load period ends.
Work the numbers
Read next
Questions people ask next
Is the direct plan always the same fund?
It is the same scheme portfolio with a different plan. The risk is the same. The cost is not. A different scheme that happens to have “direct” in an advertisement is not this comparison.
Will the gap show on my tax statement?
The expense is inside the NAV. You do not get a commission invoice. You see it as a lower value than the direct plan would have had. The tax appears only when you redeem.
How big is one percentage point?
On money you leave invested for many years, a one percentage point gap compounded is much more than one percent of today’s balance. Use the illustration and type the gap from your factsheet. Do not borrow someone else’s ratio.