0% Commissions & No fees
Invest in Direct Plans of Mutual Funds on Finity for free!
How does 0% commissions work?
Mutual funds are categorized into:
- Direct plans
- Regular plans.
The basic difference between direct and regular plans is that Direct Plans have 0% commissions. Finity only supports Direct Plans of Mutual Funds.
How does 0% commissions work in Direct Mutual Funds?
The basic difference between direct and regular plans is in the Total Expense Ratio charged to the scheme. Total Expense Ratio (TER) is the percentage of expense charged to the scheme, which is applied to the investor’s portfolio value.
The TER comprises of three components:
- Fund management expense
- Administrative expense
- Distributor commission.
The TER for direct funds do not include distributor commission (and is lowered to that extent).
How much difference does 0% commissions make to my portfolio’s returns?
A direct plan is for investors who want to invest directly in the mutual fund without routing the investment through a distributor. The plan will have a lower expense ratio since there are no distribution expenses or commissions involved. The plan will have a separate NAV that will reflect the lower expenses. However, the difference between expense ratio of a regular plan and direct plan might be a mere 1%-1.5%, but if you are long term investor even a difference of 1.5% creates a huge difference over a period.