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SIP Investing - How to Start, Manage & Optimise Your SIP
In summary
A Direct Plan describes how you invest in a mutual fund, while the Growth option describes how the scheme treats its earnings. They are not mutually exclusive choices.
- Direct Plan: You invest without a distributor, generally benefiting from a lower expense ratio.
- Regular Plan: You invest through a distributor, and the expense ratio generally includes distribution-related costs.
- Growth option: Earnings remain invested in the scheme instead of being distributed to you.
- Important distinction: You can select the Growth option under either a Direct Plan or a Regular Plan.
- Your decision: Consider your research skills, need for guidance, costs, financial goals, and investment horizon.
You can open your mutual fund account today after reviewing the options available. Do not assume that either a Direct Plan or Growth option guarantees higher returns.
What is a Direct Plan in mutual funds?
A Direct Plan allows you to invest in a mutual fund scheme without going through a distributor. You can research schemes and manage transactions yourself, using the fund house or an eligible investment platform.
Direct and Regular Plans of the same scheme generally invest in the same underlying portfolio, but have different expense ratios and Net Asset Values (NAVs). Direct Plans usually have lower expense ratios because they do not include distributor commissions.
Explore direct mutual funds to understand the direct investment route.
Who may consider a Direct Plan
A Direct Plan may suit you if you can compare schemes, understand their risks, and monitor your portfolio independently. You should be comfortable evaluating investment objectives, costs, performance, and portfolio composition.
If you need help selecting schemes or understanding investment risks, consider whether guidance from a qualified professional is worth the additional cost of a Regular Plan.
What is the Growth option in mutual funds?
The Growth option allows earnings generated by the scheme to remain invested rather than being distributed to investors. The value of your investment can increase as the underlying holdings perform, although it can also fall when markets decline.
Growth is an option within a mutual fund scheme, not a separate investment route. You can choose Growth with a Direct Plan or a Regular Plan.
For example, if you choose a Direct Plan with the Growth option, you invest without a distributor and leave the scheme's earnings invested. This combines the cost structure of a Direct Plan with the earnings treatment of the Growth option.
Growth versus Income Distribution cum Capital Withdrawal (IDCW)
Under the Growth option, returns remain invested in the scheme. Under the Income Distribution cum Capital Withdrawal (IDCW) option, the fund may distribute money to investors when permitted and when distributable surplus is available. IDCW payments are not guaranteed, and a distribution can reduce the scheme's NAV.
Choose based on whether you prioritise keeping earnings invested or may need distributions. Neither option guarantees a profit.
Direct Plan vs Growth option: Key differences
Here are the differences between direct plans and growth options:
| Feature | Direct Plan | Growth option |
|---|---|---|
| What it describes | How you invest | How scheme earnings are treated |
| Main effect | Generally lower expense ratio than the Regular Plan | Earnings remain invested |
| Available with | Growth or IDCW options | Direct or Regular Plans |
| Suitable for | Investors comfortable managing investments independently | Investors who prefer to keep earnings invested |
| Main consideration | Research, monitoring, and decision-making responsibility | Market risk and the need for regular income |
The comparison is between two different features. A Direct Plan is not automatically lower-risk than a Regular Plan, and the Growth option does not make a scheme inherently safer or more profitable.
How much can the expense ratio affect returns?
A lower expense ratio can leave more of a scheme's returns invested over time. Consider a hypothetical investment of Rs. 1,00,000 in the same scheme, with an assumed annual return of 10% before expenses.
| Plan | Illustrative annual expense ratio | Approximate return after expenses |
|---|---|---|
| Direct Plan | 1.80% | 8.20% |
| Regular Plan | 2.45% | 7.55% |
This simplified illustration subtracts the assumed expense ratio from the assumed return. Actual results depend on portfolio performance, expense calculations, compounding, taxes, and other applicable costs. A lower expense ratio does not guarantee better future performance.
Use the mutual fund calculator from Bajaj Finance to model potential investment outcomes, or the SIP calculator to explore regular contributions.
How to choose a suitable plan and option
Consider the following factors before investing:
- Your research skills: A Direct Plan requires you to make investment decisions independently.
- Your need for guidance: A Regular Plan may suit you if you value distributor support.
- Your income needs: Growth may suit you if you want earnings to remain invested rather than receive IDCW distributions.
- Your time horizon: Match the scheme's investment objective and risk to the period for which you can remain invested.
- Your risk tolerance: Review the scheme's portfolio, costs, and SEBI Riskometer before investing.
Growth-oriented schemes may invest in companies with higher expected expansion, but they can also experience volatility. Learn about inflation when assessing whether your investment approach supports your long-term purchasing-power goals.
Conclusion
Direct and Growth refer to different aspects of mutual fund investing. A Direct Plan affects how you invest and the costs you pay, while the Growth option determines how earnings are treated. You can combine both. Compare the scheme's costs, risks, investment objective, and suitability before making your decision.
Last reviewed: 14 October 2026
Mutual funds are subject to market risk. Please read the scheme-related documents carefully before investing.
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Frequently Asked Questions
Switching and investment management
Returns and distributions
Can I switch from a Regular Plan to a Direct Plan of the same mutual fund?
You can generally switch to the Direct Plan of the same scheme, subject to the fund house's procedures. However, a switch is usually treated as a redemption from one plan and a fresh investment in another. Capital gains tax and exit load may apply, so check the financial implications before proceeding.
Does a Direct Plan have a different portfolio from a Regular Plan?
Direct and Regular Plans of the same scheme generally share the same underlying portfolio and investment objective. Their expense ratios and NAVs differ because of their cost structures. Returns can therefore differ after expenses, even though the fund manager follows the same investment strategy. Always compare plans within the same scheme.
Does the Growth option pay regular income?
The Growth option does not normally distribute the scheme's earnings as periodic payouts. Instead, earnings remain invested, and the investment value reflects the scheme's performance. If you need regular cash flow, assess whether an IDCW option or a planned redemption strategy is appropriate, considering tax treatment, market risk, and the effect on your investment value.
Are IDCW payments guaranteed under a mutual fund scheme?
No. IDCW distributions depend on the availability of distributable surplus and the scheme's applicable rules. The amount and timing are not guaranteed. A distribution is not necessarily an additional return, because the scheme's NAV generally falls by an amount related to the distribution. Review scheme documents before choosing this option.
Does a lower expense ratio mean a Direct Plan is always better?
Not necessarily. A lower expense ratio can improve net returns relative to an otherwise identical Regular Plan, but it does not ensure positive returns or make a scheme suitable for you. A Direct Plan also requires independent research and monitoring. Consider whether the cost saving is worth the responsibility of managing your investments yourself.
Disclaimer
Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319
BFL does NOT:
(i) provide investment advisory services in any manner or form.
(ii) carry customized/personalized suitability assessment.
(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.
In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.
Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.
Disclaimer on Risk-O-Meter:
Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.
Disclosure: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finserv Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.
Disclaimer
Bajaj Finance Limited ("BFL") is an NBFC offering loans, deposits and third-party wealth management products.
The information BFL contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed.
This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.
Disclaimer
Mutual Fund SIP calculator may provide potential investors an approximate estimate on the maturity amount of the monthly SIP, purely based on mathematical calculation of the projected annual return rate selected by investor. However, such calculation does not factor the actual performance by the Asset Management Company (AMC) and should not be treated as any advice or assurance about the actual return of investment. Mutual Funds do not have a fixed rate of return and it is not possible to predict the rate of return. Please note that the SIP calculator are for illustrations only and do not represent actual returns which may vary depending on various factors including but not limited to actual performance, expense ratio, taxation, exit load (if any), etc.