Soon, your mutual fund investment will come with a slew of disclosures from your fund house. Among other things, your fund will be required to reveal how much commission it has paid to your distributor, the salary it has paid to its top executives, and the cost incurred by the investor under both regular and direct plan. While investors can look forward to higher transparency, most disclosures may not warrant your attention. Here's what to make of the additional disclosures.
Know the costs
If you have invested through a distributor, the fund company will now have to disclose, in the half yearly consolidated account statement ( CAS), the exact commission it has paid to the distributor, including payouts in the form of gifts and sponsored trips. Distributors typically fetch a trail commission of around 0.3-0.75% on the value of your investment for each year that your money remains invested with the fund company.
How should this concern you? Trailing commission is already factored into your scheme's expense ratio, but the exact sum is not explicitly stated. This amount is now likely to be reflected in your account statement as a standalone figure. For a 10-year SIP of Rs 5,000 every month in an equity scheme, your six-monthly account statements for 10 years are likely to reflect a total commission payout of roughly Rs 28,207 to your distributor.
