Mutual Funds and SIPs in India
Expense Ratios, Direct and Regular Plans
Funds charge annual fees that reduce returns, and direct plans cost less than regular plans because they avoid distributor commission.
Small differences in cost add up over decades.
Expense ratio
This annual fee is deducted from the fund’s assets, and expressed as a percentage.
Direct and regular
Direct plans are bought straight from the AMC and have lower fees. Regular plans include a commission paid to distributors.
Long-term effect
Over 20 years, even a one-percentage-point difference can reduce final wealth by a lot.
Advice trade-off
Some investors pay a little extra for guidance, which is a personal choice.
Two identical funds differ only in fees, and after many years the cheaper plan builds a much larger amount.
Compounding makes them large.
- Expense ratios reduce returns.
- Direct plans cost less.
- Regular plans pay commissions.
- Costs matter over time.
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