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Market Intelligence › Basic Terminologies
Where the distributor commission comes from and what it is charged on
Published by The Retail Trader · JUL 26, 2026 · Mutual Funds & AMC
A single scheme has two plans, and their NAVs differ. The portfolio of both is exactly the same and the fund manager is the same — the only difference is cost.
In the regular plan, the distributor's commission is included within the TER. The direct plan does not have that commission, so its TER is lower and its NAV runs slightly higher over time.
This does not mean the regular plan is wrong. There is a price for a service inside it — the question is whether you are actually receiving that service.
The decision rests on one honest question:
• If you can do the research and review yourself, the direct plan works out cheaper.
• If an advisor is genuinely building the plan for you, it is fair for their fees to be justified.
• In commission-based advice, a conflict of interest is always present.
• A fee-only advisor works on a different model — there you pay the fees, not the product.
Switching from regular to direct is treated as a redemption and a fresh purchase, so both exit load and tax can apply to it. Work out both of those numbers before making this decision, because the saving should be larger than them.
This article is educational only — it is not a buy or sell recommendation, it makes no claim of guaranteed returns, and it is not advice. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.