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Direct Plans Cut The Commission
The rule
Buy the direct plan of a mutual fund. The agent's yearly cut hidden in the regular plan looks tiny, but over decades it quietly eats a fortune of yours.
Where it flips
For someone who would never invest at all otherwise, refusing a helpful adviser just to save the fee can cost far more than the fee itself. So pay a flat, fee-only planner for advice, and still hold the funds as direct plans.
Every mutual fund comes in two versions of the same holdings. A regular plan pays an agent a small cut each year. A direct plan skips that fee. The gap looks tiny, often under one percent a year. But over twenty or thirty years, that small yearly leak grows and grows. In the end it swallows a big chunk of your wealth. Buying direct, through the fund house or a clean app, keeps that money working for you, not for the seller. Same fund, same manager, lower cost, more left in your hands.
A worked example
Aman invests ₹10,000 a month for 25 years. A regular plan that costs 1% more each year leaves him with roughly ₹18 lakh less than the exact same direct plan. [illustrative]
How to spot it
- ·buying funds through an agent who earns a cut
- ·'regular' shown on the fund statement
- ·cost ratio higher than the fund's direct version
Monika Halan · Let's Talk Money