It is good that you are concerned about a 0.01% (or 1 basis point) increase in expense ratio. Each such 1 bps increase can decrease your return. SEBI the regulator of Mutual Funds is doing a great job by making the AMCs reduce their expense ratios. Recently a reduction of upto 20bps was implemented.
Illustration: Each 1 bps means that your end up getting lesser in the long run. Lets say you invest Rs 1,00,000 lumpsum for 25 years. Returns are 15%. The corpus will end up at 32.92 lakhs but with a 1 bps additional expense the corpus will be 32.85 lakhs i.e. a drop of Rs 7000.
Imagine what will happen with an additional expense of 150 bps or 1.5%. That is what almost 90% investors are incurring when they do NOT invest through “Direct Plans”. They go through brokers and other apps and buy regular plans which means, that their corpus reduces.
By how much? In a direct plan they would make 32.91 lakhs whereas in a regular plan of the same mutual fund, they end up with 23.70 lakhs, a decrease of 9.2 lakhs. This means almost 40% of their TOTAL corpus has gone to the broker.
Why should you fund the broker or bank’s SIP? Go with Direct Plan mutual funds with professional advice from an online platform like Jamawealth.com (spelt as Jamaa, Indian word for ‘Accumulate’).
