How costly are regular mutual funds compared to direct plans?

Expense Ratio is deducted on daily basis as tiny fractions of annual value. So everyday when AMC declares NAV, Expense Ratio is already deducted.

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So, now how much it costs for 0.83% expense ratio for 30 odd years?
Thanks

The regular mutual funds plan to decrease the corpus by a good 20% to 30%. The difference is compounding nature as is the return.

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@ShubhS9 when the expense ratio deducted ? every month or closing time … pls clarify

Expense Ratio is deducted on daily basis as fractions of annual value. So everyday when AMC declares NAV, Expense Ratio is already deducted.

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@ShubhS9 in Exit time not Deducted Expense Ratio our profit crt sir ?.

Expense Ratio will not be deducted when you exit your mutual fund investment. However at the time of exit, there might be Exit Load applicable, this varies from fund to fund and depends on your holding period. You can learn more on this here.

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@ShubhS9 Thank you sir :slightly_smiling_face:

When I buy a mutual fund from Zerodha, am I buying Regular or Direct plan?

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All mutual funds on Coin are Direct Plans.

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So, why do we have even regular plan?

Mutual funds was sell previously(still ) through Agents . The Difference in Expense ratio of Regular-Direct was paid the Agents. Agents used to do lot of paper work, collecting checks , provide research etc.

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@Bhuvan what are the taxes & other expenses for mutual funds AMCs ?

I still dont understand how does the AMC does an index rebalancing, sell the outgoing stock & buy the incoming stock and still maintain expense ratio below 0.2%

I can not understand how is it possible?

As if Direct Plan NAV is 1, then Regular Plan NAV is always 0.98 or something.

If my buying cost is also low, how can there be a gap in returns, as NAV is already discounted.

Please someone explain,

Hy @Sanyam_Shah

Hope the example used helps you out :slightly_smiling_face: :slightly_smiling_face:

I will take a little higher difference to make my calculation easier.

At the time of buying let the NAV be 100 for direct plan and regular be 90.
Now at the time of selling if NAV of direct is at 10 percent higher I.e. 110, NAV of regular won’t be 99(10 percent higher) It will be slightly lesser than 99. Let’s say 98.5. So even if you get more units at the time of purchase of regular plan, it will still not beat the returns of direct plan.

I hope it’s clear. Still if it isn’t take some capital, divide and see how many units you get for the NAV I have quoted earlier.

You can watch this Varsity video, it’ll clear all your doubts:

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when do the expense ratio deducted?

  1. at the time of purchase MF (only one time)
  2. everyday after purchase of MF.

In the long run, the regular mutual funds proves out to be quite costly in comparison to the direct plans. Both of these articles gives very good information on this topic, you may have a look -

So, unless there is a very special reason, it is always advisable to go with the Direct Plans, whenever possible.

Regards

Expense Ratio is deducted on daily basis as tiny fractions of annual value. So everyday when AMC declares NAV, Expense Ratio is already deducted.

You can watch this video to learn more:

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