Comment on Introducing Coin - our Direct Mutual Fund Platform

Deepak Shenoy commented on 28 Mar 2017, 10:29 AM

Let me try to explain.

Every mutual fund has two options: Regular, which pays commission, and Direct, which does not.

If a direct mutual fund goes up 10% in the year. The “Regular” will go up only 9%. For example, take Birla Sun Life Equity fund. The direct plan has (as of yesterday) done 23.79% in the last one year:

The regular plan has done only 22.59% in the same time:

Rs. 50,000 invested in Direct would now be: 61,895
Rs. 50,000 invested in Direct would now be: 61,295

Effectively when you went with a “free” distributor you got the regular plan and your money is now Rs. 600 less than if you chose “Direct”.

For Rs. 100,000 your direct fund are higher than regular by Rs. 1200. For 500,000 regular funds will be lower by Rs. 6,000. And it’s lower EVERY YEAR. So in 5 years, a Rs. 500,000 holding – even if you do no more transactions will be lower for a “regular” (your free distributor thing) plan by a whopping Rs. 35,000 (compared to a similar investment in the direct option of the samemutual fund)

The Rs. 600 per year you pay to Zerodha is to get the direct plan (coin.) rather than regular (old mf.zerodha) If in five years you builda Rs. 500,000 equity fund portfolio

Effectively as you grow more than Rs. 50,000 in holding, your payment to ZD will be much lower than the gains you make in the direct plan.

Just also note that this applies for equity funds. In some Debt funds (like liquid or ultra short term) the difference between Direct and Regular is lesser (0.5% per year or so), so Zerodha becomes cost efficient only at Rs. 100,000+ worth.

I hope this clarifies.

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