I paid ₹13 Lakhs in Commissions to my Mutual Fund Agent | Direct versus Regular Mutual Funds
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- Опубліковано 6 сер 2024
- In the world of mutual fund investing, the choice between direct and regular plans can significantly impact your financial growth. Using an apple tree as an analogy, I explain in this short video the the essence of direct and regular plans. But only considering returns is not right and before one brushes it off, if your advisor is actively managing your funds, providing valuable insights, and enhancing your returns - that missing apple might seem justified
However, for simple long-term investments like SIPs (Systematic Investment Plans), I am of the opinion that sacrificing that extra apple for advice is not justfied. To put it in numbers -- say you heed the advice of a mutual fund agent and initiate a monthly SIP of ₹10,000 in a regular plan. Over a 20-year tenure and assuming an 11% return rate, your accumulated corpus would amount to a little over ₹87 lakhs. Instead -- if you had opted for the direct route, enjoying a 12% return instead, then your corpus would have soared close to the ₹1 crore mark. To put it differently -- the difference of ₹13 lakhs is what you've shell out as commission to your mutual fund agent over the last 20 years -- which I think it a bit too much
So remember, whether you prioritize convenience or maximizing returns, always weigh your options carefully to ensure your money works as hard as you do. After all, in the journey towards wealth accumulation, every apple counts.
#mutualfunds #directvsregular #financialadvisor
Disclaimer: I am not a SEBI registered investment advisor or research analyst. I am not registered with PFRDA or IRDA either. The content posted on this platform is purely for educational purposes and none of it constitutes investing or trading advice. Viewers should do their own research and diligence before investing or acting on the information presented. Some of the links I have posted in the video, the description, the comments and other related resources might be affiliate links
Axis Bank Burgundy is the worst. They don’t rebalance neither do they give advice. They take your money and give you a so-called dedicated RM. This RM keeps changing every now and then and they do absolutely nothing for your portfolio.
RM is not our friend he is employed by the bank to exploit as much money from us as possible.
No MF seller or distributor in India gives any informed advice on portfolio rebalancing. If they give one, it's usually an ad-hoc thing or something to improve their commission.
Or to reach a corpus target of that year, to another fund house.
Great shankar.. I realized this much late into investment.. What a waste of capital for such a simple mistake.. How can we switch from regular to direct.. Redemption is the only option?
Yes, operationally one has to redeem units in a regular fund into a direct fund. Pls read up on the Internet if some AMCs are foregoing the exit load when a switch to regular to direct is made, I heard about this a couple of years back.
Bang on. Honest advice. Please make a long video on pros n cons of an investment advisor (RIA) vs a CFP (MFD) - both give advice on investment but routes are different.
Thanks for the suggestion
Very good information sir
& Plz tell Abou mobikwik 12 % returns
While SEBI or AMFI introduced Direct Plans then why didn’t they discontinue Regular Plans?
If so many lakhs can be saved why SEBI do not care about retail investors in savings the huge cost?,
Regular plans are for those who needs guidance and who don't understand mutual-funds at all
May be burnol helps? 😮
It's a good question you pose -- why regular plans were not discontinued. I've never read anything to that effect. But good to see that the adoption of direct plans is improving. Today, 19% of retail and 25% of HNIs have adopted direct. For more details, please read: www.moneycontrol.com/news/photos/business/personal-finance/explained-how-direct-plans-carved-a-niche-in-the-indian-mutual-fund-industry-9797821-5.html
Only selling mutual fund scheme by agents should ne stop, that 1% is for right advise not only for selling anything...
Are you paying everyday to the doctor for what to eat and what not to eat. It's your routine so you do not need him daily. So what's the point of paying charges everyday to your distributor for 20 years. And there is a fund manager who is an expert in managing the fund then what is the role of distributor in the digital era. And what's the guarantee that the fund through the distributor will perform better. Do you hire a Car expert while buying a car, or house expert while buying the house(Broker is a salesman and not the well-wisher of you)
There is no surety which fund will perform better. But one surety is there that direct fund will definitely perform better than its regular peer.
Nobody can become a doctor or CA in one year. But becoming a fund manager I think is not very difficult.
@@bridgeraamfund house managers are professionals. Why do you need another professional?
@shankarnath Can i consider elss funds for sip instead of large cap or bluechip equity fund? Like investment v aur tax saving ho jayega
You can have more than one MF option.
It's kind of annoying how yt is giving community note on your channel while scammers run their channel without any issues
One more request- can you do a long form video comparing Momentum Index MF (very few in market, such as UTI or Tata) Vs Small Cap Index MF as a Satellite fund in overall portfolio. The challenge is limited data in Momentum Fund MF. If the objective is to generate alpha in the long term, which could be a better choice, why, the pros n cons & approx weight (%) in portfolio. Thank you. Sumeet
Thanks for the suggestion
Can you explain the massive fall in mid and small caps in past few days? Is over-valuation the reason?
The midcaps & smallcaps were above their long term averages. Just to give some context -- the Nifty Smallcap 250 Index PE ratio in May 2023 was 16.9 and on 1st March 2024 was 29.0. Essentially, for the same 1 rupee profit, you are now paying 29 rupees while you were paying almost half just 10 months earlier. A second reason is warnings issued by the SEBI which can culminate to a reduction (or stoppage) in inflows by mutual funds, less liquidity, investor neglect etc.
Thank you sir. 🎉
But regular plan and direct plan NAV is different.. direct plan NAV is higher than regular plan which means I will be have lesser units compared to regular plan = less redeem amount than regular,so can't compare the way you have done it
Hi. What you have mentioned here is exactly how my bank manager tried to trick me many years back. I didn't fall for it but the banker confided that 80% of his victims fall for this higher versus lower NAV trick.
Fortunately I have a video to help people like you from falling into this trap. If keen to learn, watch : ua-cam.com/video/scKxAhyBNcM/v-deo.htmlsi=EcVd-4hRKQiGtmzy
Shankar sir can you please make a video decoding the book rule no #1 investor..... #REQUEST
Thanks for the suggestion
why do regular fund even exist when direct plans are there?
Regular plans are there to offer in-built compensation to agents/banks etc. who distribute & advice their clients. If the client has evolved wherein he/she doesnt need advice, then they move to direct plans.
Super.how nuch you saved for the last 20 years.
Quite a bit. I haven't tracked it for many years but I reckon this will be close to 50 lakhs in commission money not paid out. Particular to my case and having seen the dark side of the distribution business, my selection of schemes were better than what MF agents would suggest -- so I believe the returns were also superior.
I agree, customer will be missing 13 lakhs...but note, Advisor will not get 13 lakhs as commission, you are just compounding his commission amount also..which might not be invested at 12%..
Maybe, returns in the future will always be an assumption
You didn't understand....am saying , commission is a revenue for MFD..he may use it for paying bills , rent and for other chores ..he may not invest the commission at 12 % rate...and it is wrong to say Advisor is getting 13 lakhs... And yes, you are correct that the investor is missing 13 lakhs.. @@shankarnath
@@srirangamvenkatasatyamurth4148 Thanks for clarifying. Hopefully the MFD has more clients .. a 100 such clients comes to 13 crores in income.
Oh...is it...😂 Request you do a video on, how Amc is paying 13 lakhs to MFD. How much MFD is getting year on year on 10K SIP , in 20 yrs ...it helps investors..@@shankarnath
@@srirangamvenkatasatyamurth4148 Thanks for the suggestion
Sir, can you make a video on the modes by which you can invest in a direct plan.
Can you please give some context? I didn't understand your definition of "modes"
Mf central, grow, ??
@@shankarnathSo can you please show how we can purchase Direct plans - there must be more than one way to do this. Paytm and Zerodha kind of apps is one way I know...but unaware of other options.
@@rasheshbhut8503Invest in MF Central.,
For Direct plans...Invest directly in fund house site or thru mfcentral where you get all mutual funds under one roof to view /transact.
My agent told me that, DIRECT MF NAV IS HIGH THAN REGULAR PLAN.KINDELY DESCRIBE..
Yes, direct NAV has to be higher because it gives better performance than regular plan NAV. Ask your agent, which gives better returns to the investor? (because that's what you are really interested in). Believe me, that agent will not give you a straight answer
without the knowledge of schemes, investment is like buying medicines directly from the pharmacy to save doctor fees, Due to that many investors might blindly invest in small cap funds only by looking at their past returns or having 20 to 25 schemes in one's portfolio, buying NFO thinking NAV is cheaper,
I hope you understood my point is having a huge follower base, it's your responsibility also to make clarity on choosing direct Vs Regular
Absolutely! Everyone should equip themselves with knowledge before buying any financial product - whether they do that independently or via an intermediary. I'm happy to have reached & served lakhs of fellow Indians over the last 4 years via UA-cam .. and improve their knowledge of investing esp. mutual funds. Glad to see many investors reaping the benefit of the education provided and taking decisions independently
I like your idea on pointing out differences between direct and regular plans. A few years back (pre Covid), a relative of mine was sold a regular plan by a banker saying "because the NAV is low in a regular plan, it is better for you". These are the kind of mis-selling practices that need to be clarified. I'll certainly come up with a video on the same. Again, it all comes to spreading education and helping people to take independent decisions
My distributor posts ads for investing in NFO and sectoral funds
@azadjain8534 I agree it's all about finding a good advisor too important, my point is regular is not a bad product who doesn't understand mutual-funds at all, after learning in the initial years switching to direct is always there is an option
Are direct plans available on platforms like icici direct or hdfc?
No for ICICI direct.
All banks platforms only sell Regular plans. Banks are not allowed to sell direct plans as they are distributor. Learnt this very very hard way.
Let me tell you a major other side to use an agent.
1 . Signature mismatch..
2. The Fund house makes mistakes
Who do you go to get your money back
I am speaking from experience
Thanks for sharing. I've never faced these issues. Curious to know -- what % of your clients or people you know have a) faced a signature mismatch or b) the fund house makes a mistake?
Do you have a property manager helps you to protect your property?
Where is the signature required? We purchased online and when the time comes will redeem it online. So where is the question of signature? Curious to know.
My agent tells to get out of an icici ulip u need to invest it somewhere in other investments .. Is it a valid point or she is lying? I heard we can withdraw ulips after 5 years as per govt guidelines. Correct me if I am wrong.
Yes, ULIPs have a lock-in of 5 years. Post that, one can withdraw completely or partially
@@shankarnath thanks a lot Shankar bhaiya 👍🏻. You videos are amazing btw
She is not lying, ULIPs are the worst of the investment product, referring to the video you would lose more like the whole of your investment in terms of value if you stay invested in ulips, those 12 lakhs would seem like a bargain( although i'm against both regular mutual funds as well us ULIPs).
I would suggest watching videos of LLA(Labour Law Advisor )on this topic, they made an outstanding video and i quit my LIC.
@@aakashb101 I will withdraw it early and bear the loses 😢and invest it in some good safe options
Well the MF agent doesnt make that much, and the reason is the commission that he earns is monthly quarterly , and in most of the cases they earn it for a living. So until they invest that commission for 20years in the same fund(direct) they wouldlnt make that amount
The right way of saying would be that for the MF agent we loose 12.5lac
Thanks for sharing this perspective. My general observation is that when someone asks "how much do you make?", people convey their salary -- say 50,000 rupees a month. Never heard anyone say something like "I make 14,000 rupees" (which is net of their rent, food, conveyance & other expenses)
@shankarnath Hi Sir, big Fan!
Actually what I wanted to tell, if someone invests 10k per month, the commission that one agent gets is say around 1%, I.e 100. Now his earning is Rs.100. Since this is his earning , it mostly gets spent.
Now even if I consider he is able to save this amount, if he invests in the same fund, he will be able to make only 5lakhs after 20yrs!
So ideally the 12.5lakhs is a opportunity loss for the Investor, and it is not earned by any other person!
Hi, I got the mathematics of that .. thanks!
This is an off-topic point but still -- since it takes a few years for that 1% of AUM to be material, a majority of them (80%+) are also insurance agents. So say, per your example -- 10k p.m. = 120k of investment and at 1%, this is just 1,200 rupees. Insurance pays a lot more (health insurance ~20% of yearly premium & term insurance ~40% of first year annual premium) .. and even with an avg. annual premium of 15,000 (excl. GST), gives the agent anywhere from 3000 to 6000 rupees and that too upfront.
Hope this insight into how they work helps
@@shankarnath This really helps, thanks Sir! I agree with you, most of the MF agents initially pitch in with lucrative MF, and then slowly once they have a good relationship with the investor, they push the ULIPs, Insurances and all the high commission items. Often they stay in touch for the first few years, when the commission is materializing.
People do not stay invested for long term like 5 - 10 years in direct plans. People without of MFD book regular profits, withdraw entire amount to buy a new property, rrnnovation of house, a foreign tour, buying xa jwellery.
Main job of MFD is to keep clents motivated & invested in ups & downs of markets for 15 - 20 years.
I have 1 question to you..
If you knew agent got 1% and make a huge amount with just doing a sip. Why u are here for teaching lession to others.
Go and sell mutual funds.
If u make this type of video kindly also aware people what are the advantage of an agent.
Thanks for the suggestion. While I don't do it, it's definitely very tempting to sell regular plan mutual funds -- afterall, 13 lacs commission from just 100 clients is 13 crores in income over 20 years.
@@shankarnath I don't want to share my personal data wid u.
I just want you to tell do not aware people only one side try to clear them both side .