Costs matter. Investing also costs, but the aim here is to maximise returns and yet minimise the costs. To some extent, this has been made possible if you have been investing in mutual funds. The capital market regulator, Securities and Exchange Board of India (Sebi), has mandated that all mutual funds must have direct plans.
Every mutual fund scheme comes with a cost that is embedded in its net asset value. Equity funds can charge a maximum of 2.5% of weekly average net assets and debt funds can charge a maximum of 2.25%. Among others, this consists of management fee that your fund house collects, sales and marketing fees, registrar charges, and distributor fees. A direct plan doesn’t have distributor fees as you bypass the distributor and buy it directly from the fund house. Let’s look at how much it can help you save.
