Pat your back if you already invest regularly in mutual funds. You are among the top 2% of the nation's population that is experiencing the incredible convenience, professionalism and returns that the industry has been offering to retail investors.
However, there is a 95% likelihood that you started investing through your bank, broker or your friendly neighbourhood uncle a.k.a agent. In that case, you have invested in what are known as REGULAR plans, eg. "HDFC Top 200 Regular Plan - Growth." You probably think they did this for free as you didn't pay them anything. Get ready to hear some eye-popping numbers, of how you may be losing insane amounts of money to these agents.
A financial product is just like any other retail product - like your soap. You pay for the soap, but a hefty part of it goes as commission to the distributor. Financial products are no different. When you buy a REGULAR mutual fund, up to 1% of your wealth goes to your agent as commissions. But here's the catch. You pay that amount every year. I repeat - every year as long as you are invested. To put a number to this - If you are a 25 year old investing a flat ₹8,000 every month in mutual funds, you are likely to lose more than ₹1 Crore* of wealth as commissions paid out to your agent by the time you retire. This ₹1 crore represents 20% of your entire wealth. To put it in a different perspective, the distributor just needs to find 4 other people like you to make as much money as you would by the time you retire. Take some time to wrap your head around how big that number is!
But wait - How does that happen?
See, When you invest in any mutual fund, the fund house gives a part of your wealth as incentives to your distributor. What you don't realize is that money is coming out of your own pocket! You probably think that you don't pay anything. However you are giving away more than 20% of your life's savings as commissions to a person who has taken a signature from you once.
Wow - I had no idea i'm losing that much to commissions. But is there a way to not pay that amount?
Yes there is. Thankfully, the regulator has mandated every scheme to have a direct scheme as well, which means there is a scheme called HDFC Top 200 Direct Plan - Growth. Just invest in the DIRECT plan and avoid the REGULAR ones.
But how do I go about doing that?
You can use a portal such as Expowealth, which gives access to DIRECT Mutual Funds and invest in schemes of 26 fund houses. You can also initiate SIPs in all of them with a single bank mandate.
But what happens to my current holdings? I bought them through my agent/agents.
We've got you covered there. Once you open an account with Expowealth, you can switch all your existing holdings to DIRECT schemes in just a few clicks and immediately stop losing all the commissions from your wealth.
Exciting! How do I get started at Expowealth?
Just sign up and we'll guide you through the process. Activate your investment account and start saving lakhs of rupees in commissions.
* Assuming 1% commissions and average returns of 12%