Why is the NAV for direct mutual funds higher than regular mutual funds?

To understand why the NAV of a direct fund is higher than a regular fund, one has to understand the concept of the expense ratio of a mutual fund.

The expense ratio is the amount of money that is paid to the fund house towards managing investor’s money. For instance, if a client invests ₹5,000 with an expense ratio of 1.5%, the client pays the fund house ₹75 a year to manage their money.

The fund’s NAV is arrived at after deducting the expense ratio. Hence, the higher the expense ratio, the higher the deduction and the lower the NAV. The expense ratio in regular funds is higher than the expense ratio in direct funds because of which the NAV of regular funds will be lower than direct funds.

To learn everything about mutual funds see Introduction to Mutual Funds – Varsity by Zerodha.