FREEDOM / WISE
Worked ExampleHand-crafted

What's the lifetime cost of choosing Regular plan for a 25-year SIP?

Scenario

₹10,000 monthly SIP for 25 years at 12% gross fund return. Compare Direct (0.25% TER) vs Regular (1.75% TER) of the same underlying fund.

Inputs

Horizon years
25
Direct ter %
0.25
Monthly sip INR
10000
Regular ter %
1.75
Gross return %
12

Calculation

  1. 1.

    Direct plan net CAGR

    12% − 0.25% → 11.75% CAGR

  2. 2.

    Direct plan terminal corpus

    ₹10K × SIP-FV factor at 11.75%, 25 yrs → ₹1.85 Cr

  3. 3.

    Regular plan net CAGR

    12% − 1.75% → 10.25% CAGR

  4. 4.

    Regular plan terminal corpus

    ₹10K × SIP-FV factor at 10.25%, 25 yrs → ₹1.45 Cr

  5. 5.

    Avoidable lifetime loss

    ₹1.85 Cr − ₹1.45 Cr → ₹40.00 L

Conclusion

₹40 lakh of avoidable loss in terminal wealth from choosing Regular plan over Direct plan — same fund, same manager, same portfolio. The gap is paid entirely to the distributor as embedded commission.

Tradeoffs

For investors who legitimately use a fee-only SEBI-registered investment adviser (RIA), paying ₹30-50K/year flat fee + Direct plans is cheaper than commission-embedded Regular plans above ₹15-20 lakh portfolio. For DIY investors, Direct is always cheaper, with no advisor cost.

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What does a 1.5% TER gap between index and active compound to over 25 years?

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What does rupee cost averaging actually deliver across volatile vs steadily rising markets?

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