In Regular Plans, the Mutual Fund Company pays your broker a hidden commission every year.
In Direct Plans, instead of being paid to the broker, that money gets added back to your gains every single year. And it adds up to a lot.
Your savings or additional gains are the commissions that your broker/distributor would normally receive. These commissions vary from scheme to scheme, but are generally in the range below. When you buy Direct Plans these commissions come back to you instead of your broker.
BY BANKS/ BROKERS/ DISTRIBUTORS
TAX SAVING FUNDS
& INCOME FUNDS
MONEY MARKET FUNDS
Year 1 commission
|1.4-1.6%||1.3%||0.3% to 0.5%||0.3% to 0.8%||0.05% to 0.15%|
Additional Year 1 commission
paid for investors not residing in top-15 cities
1.0% to 2.0%
|1.5% to 2.0%||1.5% to 2.0%||-||-||-|
Year 2 onwards
|1.2%||1.3%||1.2%||0.4% to 0.5%||0.5% to 0.8%|
0.05% to 0.15%