[mav2000]

Originally Posted by autospeaker

Do you mean to say the below?

1) I ask ICICI direct to give me MF worth 2000. They deduct the commission of 20 rs (1%) upfront and get me the units worth 2000-20 = 1980 rs only.

2) After a year, my units are worth 2500 (Assumption). Now again, 1.5% of 2500, which will be 375, is deducted from my 2500. Consequently, my net worth at the end of 1st year would be 2500-375 = 2125.


Am I right here?

Nope, you are wrong there and the previous person who asked this question is also wrong.

Basically ICICI direct does not charge you anything upfront or on a yearly basis for holding funds with them. They do receive trail income from the mutual fund house, but thats the same as what any other broker online or offline would get.

I remember they used to charge 100 rupess per transaction for really small accounts some time back. But that again was only on the first transaction. I dont know if this has changed. As a long time investor in all types of financial products I have found ICICI Direct to be one of the best websites for investing that I have used till date. Everything is available without having to call or speak to anyone, including tax calculations, which is a big help for me.

[autospeaker]

Originally Posted by mav2000

Nope, you are wrong there and the previous person who asked this question is also wrong.

Again, I am back to where I began, last week. I am not able to figure out the difference between Regular MF( ICICI Direct) and Direct Funds ( ex. Zerodha).

We can probably connect with private messages, if you are willing to help me.

[pathik]

Originally Posted by autospeaker

Do you mean to say the below?

1) I ask ICICI direct to give me MF worth 2000. They deduct the commission of 20 rs (1%) upfront and get me the units worth 2000-20 = 1980 rs only.

2) After a year, my units are worth 2500 (Assumption). Now again, 1.5% of 2500, which will be 375, is deducted from my 2500. Consequently, my net worth at the end of 1st year would be 2500-375 = 2125.


Am I right here?

In essence what are have stated above is right, but I think the upfront commission is paid by the distributor to the broker. Trail commissions are calculated on a daily basis as a percentage of the assets under management of the distributor and are paid monthly to the broker. I am taking an example here:

Suppose you invest Rs 5,000 every month in an equity scheme through a systematic investment plan (SIP) for ten years. Assuming a return of 12% CAGR, the Rs. 6 lakh invested will grow to Rs. 11.62 lakh.

Considering a trail commission of 0.5% and upfront commission of 0.75%, your sixmonth account statements during these ten years will reflect a total commission payout of roughly Rs 28,207 to your distributor.

This works out to 5% of your total investing gains.

Example from here

Also, you haven't considered the fact that just like Zerodha, even ICICI has annual charges for Demat account (unless you have a special, life-time free plan). In either case, Direct Plans will always work out cheaper in the long term. Now, if your broker (ICICIDirect or others) is providing you value-added services like advisory then you need to decide if it's worth the amount you will lose in commissions.

[pathik]

Originally Posted by mav2000

Basically ICICI direct does not charge you anything upfront or on a yearly basis for holding funds with them. They do receive trail income from the mutual fund house, but thats the same as what any other broker online or offline would get.

Not true. When you buy funds in a Direct plan, your broker does not receive any commission. This is a new rule announced last year by the Government to allow retail investors to invest in Direct plans through brokers.

[mav2000]

Originally Posted by pathik

Not true. When you buy funds in a Direct plan, your broker does not receive any commission. This is a new rule announced last year by the Government to allow retail investors to invest in Direct plans through brokers.

I said if you buy online or offline through a broker. If you buy directly then you don't have the dilution in your nav.

[pathik]

Originally Posted by mav2000

I said if you buy online or offline through a broker. If you buy directly then you don't have the dilution in your nav.

Actually, no. I can buy a direct plan online through a broker (Zerodha) and not be charged any commissions and without any nav dilution.

[saket77]

Originally Posted by autospeaker

Again, I am back to where I began, last week. I am not able to figure out the difference between Regular MF( ICICI Direct) and Direct Funds ( ex. Zerodha).

We can probably connect with private messages, if you are willing to help me.

Discussing in public will help all!

Direct mutual funds are those which you buy directly from asset management companies or mutual fund house. It typically has no intermediaries or distributers in between. So, you save on the commission that you would otherwise pay to the distributor when you buy regular mutual funds. That percentage can vary between 1% to 2.5% for the first year in equity funds and around 1-1.5% thereafter. In long term, it can make a significant difference to your corpus. But then you must weigh the benefits that you may receive if investing through a knowledgeable distributer.

Regards,
Saket.

[mav2000]

Originally Posted by pathik

Actually, no. I can buy a direct plan online through a broker (Zerodha) and not be charged any commissions and without any nav dilution.

Ok, didnt know about that. Wow, working without a commission in this business, either they have very deep pockets or they have an extremly slim cost structure.

[The Rationalist]

Originally Posted by autospeaker

Again, I am back to where I began, last week. I am not able to figure out the difference between Regular MF( ICICI Direct) and Direct Funds ( ex. Zerodha)

Hi auto speaker,
Why don't you use MF Utility , they have a great application too and no annual charges like Zerodha. It's being managed by AMFI, the consortium of mutual funds in India. Only Mirae, Canara and Tata are the fund houses not in the consortium. They will all soon join I feel.

Regards,
The Rationalist.

[pathik]

Originally Posted by mav2000

Ok, didnt know about that. Wow, working without a commission in this business, either they have very deep pockets or they have an extremly slim cost structure.

They charge flat Rs. 50 per month irrespective of how many SIPs you buy through them. And I believe they have much lower costs compared to bigwigs like ICICIDirect.

There are other options like MFUtility or you can directly buy from the fund-house's website - but I find the Zerodha charges very reasonable for the overall experience it provides.

[autospeaker]

Originally Posted by saket77

Discussing in public will help all!

That percentage can vary between 1% to 2.5% for the first year in equity funds and around 1-1.5% thereafter. In long term, it can make a significant difference to your corpus. But then you must weigh the benefits that you may receive if investing through a knowledgeable distributer.

Again, how and when are they charging me this "commission"? Are they giving me lesser units? Or would they ask me to pay separately? How exactly is this commission taken from me annually.

Originally Posted by mav2000

working without a commission in this business, either they have very deep pockets or they have an extremly slim cost structure.

These people do charge for account maintenance. For example, Zerodha charges 50rs/month once your invested amount crosses 25K, along with 300 rs account maintenance fee annually. So, effectively 900 rs / year.

Originally Posted by The Rationalist

Hi auto speaker,
Why don't you use MF Utility , they have a great application too and no annual charges like Zerodha. It's being managed by AMFI, the consortium of mutual funds in India. Only Mirae, Canara and Tata are the fund houses not in the consortium. They will all soon join I feel.

Whats the ease when compared to, say ICICI direct or any other apps. And do we need to do any paperwork to get an account or every time we buy a MF. Please let me know.

[saket77]

Originally Posted by autospeaker

Again, how and when are they charging me this "commission"? Are they giving me lesser units? Or would they ask me to pay separately? How exactly is this commission taken from me annually.

By adjusting the NAV. As the name suggests, Net asset value is derived after deducting all expenses. You don't have to pay separately. You can find out approximately how much will be the commission by looking at difference between the expense ratio of regular vs. direct funds on websites like value research.

[deepv]

Originally Posted by autospeaker

Do you mean to say the below?
...

Am I right here?

The trailing commission keeps getting cut from the NAV of your units (as part of expense ratio, that's why expense ratio of Direct scheme of same MF will be less).
The upfront commission may get cut from your input amount in some cases.

[pradkumar]

Mutual funds the world over charge many types of costs to investors — entry and exit loads, management fees and transaction charges. In India, entry loads are banned by SEBI (exit loads are allowed, though). While you are free to pay an extra advisory fee or brokerage to your distributor, all other costs that a fund may charge are packed into the metric called ‘expense ratio’.

The expense ratio is calculated as a percentage of the fund's average net asset value (NAV). The daily NAV that a fund puts out in the public domain is after deducting the expense ratio. But mutual funds are not allowed to charge whatever they please as expense ratio. The ratio is subject to SEBI-imposed limits.

http://www.thehindubusinessline.com/...cle7392417.ece

Direct funds are cheaper because they have lower expense ratios. As far as I know, one ***cannot*** buy direct funds using a demat account. You can buy direct funds directly from the respective fund house websites, Zerodha, or MF Utilities.

There is no paper work each time you buy a fund through these portals.

Zerodha holds the funds in demat form. In addition to the yearly, Rs. 900 there could be some charges when you exit funds because they are held in demat form. I don't know how much these charges are. There are no advantages to holding mutual funds in demat form.

Pradeep

Originally Posted by autospeaker

Again, how and when are they charging me this "commission"? Are they giving me lesser units? Or would they ask me to pay separately? How exactly is this commission taken from me annually.



These people do charge for account maintenance. For example, Zerodha charges 50rs/month once your invested amount crosses 25K, along with 300 rs account maintenance fee annually. So, effectively 900 rs / year.




Whats the ease when compared to, say ICICI direct or any other apps. And do we need to do any paperwork to get an account or every time we buy a MF. Please let me know.

[The Rationalist]

Originally Posted by autospeaker

Whats the ease when compared to, say ICICI direct or any other apps. And do we need to do any paperwork to get an account or every time we buy a MF. Please let me know.

For MF Utility ,everything from account opening to paying for funds can be done electronically, not even a single paper needs to be filled. It's so easy. And every purchase can be done through their application, which is very user friendly. I can help you step by step if needed.

Even camsonline has online portal, they cover Tata funds. So only Mirae and Canara funds are left out. Mirae has few funds which you can't buy directly even through their own website!