AMFI (Association of Mutual Funds in India) just released a report on commissions earned by mutual fund distributors for 2021-2022. The commissions earned soared to over Rs.10,400 crores😯
When investing in mutual funds, there are two plans, Regular Plan and Direct Plan. When investing in a regular plan, you have to pay commissions, which can be as high as 1% yearly on the invested amount, as long as you’re invested.
If you’re investing in a direct plan, you pay no such commissions; on Coin, we offer zero commission direct mutual funds.
How does this affect you?
Here’s a look at the performance of direct and regular plans of Axis Long Term Equity Fund. Over the past 5 years, the direct plan has returned 83.49%, while the regular plan has returned 75.41%.
While the difference of 8.08% looks small, as @Bhuvan has mentioned here, you need to know that commissions compound over time. The more your corpus grows, the more you end up paying in commissions. If you’re a DIY investor, it merely makes sense to invest in regular plans.
It is important to keep the costs of your investments low. Costs are the biggest drags in the performance of your investments in the long run.
Commission earned by Mutual Fund distributors in FY 2021 - 2022
Here’s a list of the top 20 mutual fund distributors and the commissions they earned:
NJ IndiaInvest Pvt Ltd | 1298.32 |
---|---|
State Bank of India | 734.69 |
HDFC Bank Limited | 580.62 |
Axis Bank Limited | 537.77 |
Prudent Corporate Advisory Services Ltd | 440.91 |
ICICI Securities Limited | 401.41 |
ICICI Bank Limited | 355.60 |
Kotak Mahindra Bank Limited | 252.99 |
ANAND RATHI WEALTH LIMITED | 169.79 |
Citibank N.A | 138.30 |
IIFL WEALTH PRIME LIMITED | 119.20 |
Hongkong & Shanghai Banking Corporation Ltd. | 117.48 |
Standard Chartered Bank | 109.43 |
Darshan Services Private Limited | 107.41 |
Julius Baer Wealth Advisors (India) Private Limited | 100.59 |
Bajaj Capital Ltd. | 92.43 |
HDFC Securities Ltd | 74.76 |
JM Financial Services Limited | 73.64 |
Bank Of Baroda | 69.64 |
Over the past few years, the rate of commission earned by distributors has been enormous. Here’s a look at the charts.
I’m a new investor; what does all of this mean?
To learn everything about investing in mutual funds and financial markets in general, we always recommend you to start with Varsity.