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Why DIRECT funds are more profitable compared to REGULAR mutual funds? Financial advice! SST Ep03 - YouTube
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[Intro Music ]
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Welcome all into the fourth
episode of the smart stock tip.
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Like every time this episode will tell
you how you can save your lakhs of rupees
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or say you can earn lakhs
of Rupees extra
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by investing in mutual funds
if you know this small thing.
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In today's video, I will tell you the difference
between direct and regular Mutual Funds
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why most people consider a
direct mutual fund a better option
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And how you can invest in
direct mutual funds?
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And the most important thing is how you will identify
if the fund you are investing in is direct or regular?
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One thing is clear that investing
in regular mutual funds is expensive
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And it's a little more profitable
for companies and distributors.
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That's why when a company promotes its
Mutual Fund or when a distributor comes to you
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along with mutual fund advice, he is 99.99%
trying to sell you regular Mutual Fund
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This is not a wrong thing but if you know the
difference between regular and direct before investing
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Then that's what we called awareness.
And if you also want to be JAGRUK JANTA
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Then you can support us by
buying our merchandise
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We have the same thing printed on our
t-shirt 'we know what you don't tell us
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This means we know all the stuff
which you don't want to tell us.
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First, let's talk about regular Mutual
Fund. So the story starts before 2013
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When there was no such thing as direct Mutual Funds.
In those times as you invest in shares now
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You have to open a Demat account, after that a
broker from which you have opened your account
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Will take a brokerage fee on the purchase of
shares. Similarly while buying Mutual Fund,
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you were to pay distributors Commission
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Because you never used to buy Mutual Funds
directly, a distributor on your behalf
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was used to go to mutual fund house,
finish the paperwork and then
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finally used to start your
investment in a mutual fund.
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So in exchange of this, he used
to charge distributors fee from you.
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you don't have to pay distributors
fee separately.
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it is just a part of your mutual
fund's expense ratio
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Means for example if the expense ratio of your Mutual
Fund is 2% and the distributor's fee can be 1% in it
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And as I have told you in the
third episode of a smart stock tip
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1% difference in expense ratio can lead
to loss of lakhs of rupees. How?
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So if 2 mutual funds have an expense
ratio of 1.29% and 2.15% respectively
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And you have put in the SIP of
5000 in both of them for 25 years,
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Whose rate of return is 12%. So after 25 years,
mutual fund A which has an expense ratio of 1.29%
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will get you 11 lakh rupees more than mutual
fund B which has an expense ratio of 2.15%
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only this much difference comes in
direct and regular plan because
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while investing in a direct mutual fund you
save around 1%-1.5% of the distributor fee
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This means you can save around 10-11 lakh
rupees according to the above example.
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And because every mutual fund
is not tax saving Mutual Fund,
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So you should consider that there
will be a tax on your whole income and
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Inflation will also affect your income because
after 25 years expensiveness will be at a peak
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And with that, if you will give the
distributors commission of 10 to 11 lakh
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Then your income will
significantly go down
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I am not discouraging buying
mutual funds from a distributor
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But if you have an option to save your
own money then you should know about it.
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This distributors commission
of 1%-1.5% may seem less to you
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Because you are thinking that I will
invest around 1 lakh rupees in 1 year
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On which I have to give the
commission of 1000 or 1500 rupees
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But you are forgetting that you have to pay this
commission every year from your total investment
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and you also have to pay the same on
the profit over your investment
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So if your investment is compound then your
commission will also increase by compounding
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Now you understood that direct
mutual fund is beneficial for you
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And now you are willing to invest in
direct mutual fund then, how to do it?
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So friends there are certain apps in the market
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that gives you the option to invest
in a mutual fund without brokerage
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To invest in the share market
you need a brokerage firm
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And Brokerage firm charges a brokerage
fees from you whenever you invest in shares.
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But if you open a Demat account through 'Zerodha',
invest in shares, then you have to pay zero brokerage.
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Means totally free and if you
are a beginner in investing,
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then you will be provided 7 investing
courses for free from 'Zerodha'
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if you open your Demat account
through the link given in the description
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If you like this video then please hit the like
button and do subscribe and press the bell icon
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Because if you like this video then you
will definitely like the upcoming videos
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to today's question.
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