{"id":1035,"date":"2018-01-25T09:38:18","date_gmt":"2018-01-25T09:38:18","guid":{"rendered":"http:\/\/blog.kuvera.in\/?p=1035"},"modified":"2019-06-10T09:35:14","modified_gmt":"2019-06-10T09:35:14","slug":"top-4-questions-we-still-get-about-mutual-fund-commissions","status":"publish","type":"post","link":"https:\/\/kuvera.in\/blog\/top-4-questions-we-still-get-about-mutual-fund-commissions\/","title":{"rendered":"Top 4 questions we still get about Mutual Fund commissions"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_40 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" area-label=\"ez-toc-toggle-icon-1\"><label for=\"item-69df53126443c\" aria-label=\"Table of Content\"><span style=\"display: flex;align-items: center;width: 35px;height: 30px;justify-content: center;direction:ltr;\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/label><input  type=\"checkbox\" id=\"item-69df53126443c\"><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/kuvera.in\/blog\/top-4-questions-we-still-get-about-mutual-fund-commissions\/#Commissions_are_small\" title=\"Commissions are small &#8211;\">Commissions are small &#8211;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/kuvera.in\/blog\/top-4-questions-we-still-get-about-mutual-fund-commissions\/#Commissions_are_paid_only_in_the_first_year\" title=\"Commissions are paid only in the first year &#8211;\">Commissions are paid only in the first year &#8211;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/kuvera.in\/blog\/top-4-questions-we-still-get-about-mutual-fund-commissions\/#Commissions_are_paid_only_when_I_sell_the_fund\" title=\"Commissions are paid only when I sell the fund &#8211;\">Commissions are paid only when I sell the fund &#8211;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/kuvera.in\/blog\/top-4-questions-we-still-get-about-mutual-fund-commissions\/#Commissions_can_not_be_avoided\" title=\"Commissions can not be avoided &#8211;\">Commissions can not be avoided &#8211;<\/a><\/li><\/ul><\/nav><\/div>\n<p><img loading=\"lazy\" class=\"alignnone size-medium wp-image-1201 alignleft\" src=\"https:\/\/blog.kuvera.in\/wp-content\/uploads\/2018\/01\/Screen-Shot-2018-01-25-at-15.01.56-300x146.png\" alt=\"\" width=\"300\" height=\"146\" srcset=\"https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2018\/01\/Screen-Shot-2018-01-25-at-15.01.56-300x146.png 300w, https:\/\/kuvera.in\/blog\/wp-content\/uploads\/2018\/01\/Screen-Shot-2018-01-25-at-15.01.56.png 705w\" sizes=\"(max-width: 300px) 100vw, 300px\" \/>Direct plans of Mutual Fund schemes give higher returns than regular plans because of lower expense ratio. Lower expense ratio is due to the fact that Direct Plans do not pay any commissions to the advisor (usually an RIA). The commission savings means that for the same scheme, Direct plan can have up to 1.5% \/ year higher returns than Regular plans.<\/p>\n<p>Direct plans were mandated by Securities and Exchange Board of India (SEBI) in 2012 and implemented from January 2013. It has been 4 years and there are quite a few fee only advisors (both online and offline) in the market, but we still hear so many questions about commissions. This post is to help clarify the Top 4 myths that still persist about Mutual Fund commissions.<\/p>\n<h5><span class=\"ez-toc-section\" id=\"Commissions_are_small\"><\/span>Commissions are small &#8211;<span class=\"ez-toc-section-end\"><\/span><\/h5>\n<p>Anecdotal survey points to brokers always characterizing Mutual Fund commissions as small. Even online investment brokers use &#8220;small commission&#8221; extensively in their FAQ. Up to 1.5% annual commissions looks small &#8211; but its long term impact on your portfolio is very big. While brokers will be the first to highlight the compounding effect of long term Mutual Fund holdings they fail to highlight that commissions paid out annually also have a similar compounding effect. Saving 1.5% in commissions every year would mean a 45% larger portfolio in 25 years.<\/p>\n<h5><span class=\"ez-toc-section\" id=\"Commissions_are_paid_only_in_the_first_year\"><\/span>Commissions are paid only in the first year &#8211;<span class=\"ez-toc-section-end\"><\/span><\/h5>\n<p>This we attribute to the practice of splitting the commission between the broker and the investor. Since the broker would only split the first year&#8217;s commission, it has led many to believe that Mutual Fund commissions are paid only in the first year. In reality if you buy a fund from a broker, they will continue to receive annual commissions as long as you are invested in that fund regardless of the level of service you receive. Commissions are buy once, pay forever (till you sell).<\/p>\n<h5><span class=\"ez-toc-section\" id=\"Commissions_are_paid_only_when_I_sell_the_fund\"><\/span>Commissions are paid only when I sell the fund &#8211;<span class=\"ez-toc-section-end\"><\/span><\/h5>\n<p>A lot of people ask this question, in person and on email, and somehow we cant figure out why they think so. Brokers receive commissions on an annual basis as it is included in the expense ratio of the regular Mutual Fund scheme they offer.<\/p>\n<h5><span class=\"ez-toc-section\" id=\"Commissions_can_not_be_avoided\"><\/span>Commissions can not be avoided &#8211;<span class=\"ez-toc-section-end\"><\/span><\/h5>\n<p>With so many &#8220;Free for life&#8221; online investment brokers, investors end up believing that commissions are something you have to pay to invest in Mutual Funds. This is far from truth. Online Direct plan advisors like ours will help you invest in Direct plan of Mutual funds and help you save commissions.\u00a0 Remember an online &#8220;Free for life&#8221; account to invest in Regular funds is actually a very expensive way to invest in Mutual Funds. If you agree sign our petition <a href=\"https:\/\/www.change.org\/p\/sebi-full-disclosure-in-mutual-fund-distribution-advertising\" target=\"_blank\" rel=\"noopener\">here<\/a>.<\/p>\n<p>Mutual Fund commissions were necessary till 2013 as there was no way to invest in Mutual Funds without paying commission. Not anymore. Direct Mutual Fund plans are here to stay and help you avoid the overhead of Mutual Fund commissions to generate higher long term returns.<\/p>\n<p>Still not sure. Learn more about saving Mutual Fund commissions <a href=\"http:\/\/blog.kuvera.in\/direct-plans-nav-calculation\/\" target=\"_blank\" rel=\"noopener\">here<\/a> and <a href=\"http:\/\/blog.kuvera.in\/direct-plans-better\/\" target=\"_blank\" rel=\"noopener\">here<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Direct plans of Mutual Fund schemes give higher returns than regular plans because of lower expense ratio. Lower expense ratio is due to the fact that Direct Plans do not pay any commissions to the advisor (usually an RIA). The commission savings means that for the same scheme, Direct plan can have up to 1.5% [&#8230;]<\/p>\n<p><a class=\"btn btn-secondary understrap-read-more-link\" href=\"https:\/\/kuvera.in\/blog\/top-4-questions-we-still-get-about-mutual-fund-commissions\/\">Read More&#8230;<\/a><\/p>\n","protected":false},"author":2,"featured_media":1201,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false},"categories":[103],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Top 4 questions we still get about Mutual Fund commissions - Kuvera<\/title>\n<meta name=\"description\" content=\"4 commonly asked questions on Mutual Fund commissions and how to avoid paying them by investing in Direct Plans of Mutual Fund schemes\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/kuvera.in\/blog\/top-4-questions-we-still-get-about-mutual-fund-commissions\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Top 4 questions we still get about Mutual Fund commissions - 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