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

Direct mutual funds have higher NAVs because they charge lower expense ratios than regular funds.

How expense ratios work

The expense ratio is the annual fee you pay for fund management. For example, if you invest ₹5,000 in a fund with a 1.5% expense ratio, you pay ₹75 annually.

Fund houses calculate NAV after deducting this expense ratio, so lower expenses directly result in higher NAVs.

Direct vs regular funds

Regular funds include distributor commissions and intermediary costs in their expense ratios. Direct funds eliminate these additional charges, creating lower expense ratios and higher NAVs for the same underlying investments.

You can learn more about mutual fund fundamentals in Introduction to Mutual Funds – Varsity by Zerodha.

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