Categories: BlogDebt Fund Tax BenefitsDirect Mutual Fund InvestmentsFinancial PlanningJama To Invest SmartMutual Fund CommissionsSavvyTax Saving Mutual Funds

Mutual Fund Commissions Will Drain Your Expected Returns

It is time to get real about mutual fund commissions. At 1% or more, add the upfront trail commissions, the cost is too high and needlessly gives away most of your expected  gains. You must consider your gains in real, after-inflation returns. If your investment doesn’t grow more than inflation then you are losing money!

Fees should be a consideration for investors, especially in today’s low-rate, low-return, fixed rate investment environment, but they should not be the only factor used to determine whether to use a particular adviser or financial product.Management and Fund fees (or Expense Ratio) are fees that mutual funds automatically deduct from your investment on a daily basis to cover their costs. These include expenses for fund management, advertising, administration, and for paying sales commissions to distributors.

Research from global markets has shown time and again that funds with low expense ratios tend to give better long-term returns than funds with high expense ratios. This isn’t rocket science – cheaper funds that shave away less from your portfolio value will obviously be more likely to outperform expensive funds. This does not mean that costs are the only factor that determines returns, but over the long run it turns out to be one of the most important ones so it is worth keeping this in mind when picking funds.

The world is entering a phase of moderate growth. Already markets are considered overvalued. If a growth of 10% is projected for an equity mutual fund, then please remember that this is before all sorts of fees and taxes. [See an illustration]

Conclusion :

The best way out of this is to select a direct mutual fund that charges low fees. The long term wealth generating portfolios that we review are usually low cost and simple. So, keep it simple and get real about commissions.

Recent Posts

Ram Kalyan Medury

Share
Published by
Ram Kalyan Medury
Tags: direct vs regular mutual fundshow to buy direct mutual funds onlinehow to get ROI with mutual fundsHow to invest in direct mutual funds onlinewhat are mutual fund commissionswhat are the debt fundswhat is mutual fund charge

  • Blog
  • Cat B
  • Investment Questions & Answers
  • Jama To Invest Smart

Are Free Direct Mutual Fund Platforms For Real?

If you are in the know of things, you might have switched your mutual fund portfolios from regular plans to…

April 9, 2019 9:00 am
  • Blog
  • Financial Advisor
  • Financial Planning
  • Savvy

5 Reasons Why A Good Financial Advisor Is A Great Investment

Conventional thinking is that only the rich can afford a financial advisor. After all, a financial advisor helps accelerate wealth…

December 2, 2018 12:24 am
  • Blog
  • Financial Planning
  • Savvy

12 Point Checklist To Change or Appoint An Investment Advisor

Choosing a right investment advisor could get stressful, more so if you already have an 'advisor' and you need to change…

November 3, 2018 3:39 am
  • Blog
  • How to Invest

Direct Plan Mutual Funds For Just Rs 100 per month

Here is a handy list of funds that are available for an SIP of just Rs 100. Fund Class 3…

October 28, 2018 9:41 am
  • Blog
  • Financial Planning
  • How to Invest
  • Savvy

What To Do When Markets Fall and Mutual Fund NAVs are Down

We are living in interesting times. I wrote last week about the recent mutual fund market correction. Turns out that…

October 26, 2018 1:56 am
  • Blog
  • Direct Mutual Fund Investments
  • Financial Planning
  • Savvy
  • Starter

When “FREE” Backfires! Busting TWO Common Myths on Mutual Fund Platforms

Let me come straight to the point. Investors of Mutual Fund are being increasingly misled on FREE offerings that leads…

August 12, 2018 5:01 am