No Load

No distributor, no load
Sandeep Singh
Monday , August 27, 2007

Even as life insurers and the insurance regulator defend high agent commissions, capital market regulator Sebi is proposing to scrap entry loads on investments not made through an agent (that is, made directly or through the Internet).

Sebi regulations allow fund houses to charge you a total load (entry plus exit) of 7 per cent, which they use to pay their distributors. Typically, fund houses charge an entry load of 2.25 per cent in equity funds. So, if you invest Rs 10,000 in an equity fund, you are allotted units for Rs 9,775 — the rest the fund house gives to distributors.
Knowledgeable Investors like Gaurav Garg, a CA in Delhi, have been lamenting they get nothing in return for this outgo. “My distributor gives no advice. When I can use the Internet to identify schemes, and invest directly, why should I pay an entry load?” In the long run, the savings from the waiver of an entry load of 2.25 per cent add up (See table).
At present, only Quantum Mutual Fund, which doesn’t sell through distributors, works on a no-load model. All other funds levy a load, regardless of how you invest. This might change. Says A.P. Kurien, chairman, Association of Mutual Funds in India (Amfi): “It’s an investor-friendly step. Knowledgeable investors can invest by themselves, but others might still need help from distributors.”
Predictably, distributors, who face a potential loss of income, are opposed to this move. As an investor, if you want to present your views to Sebi, email to ruchic@sebi.gov.in or send a snail mail to Sebi, Investment Management Department, SEBI Bhavan, Plot number C-4A, G Block, Bandra Kurla Complex, Bandra (E), Mumbai-400051 before September 12.
Load unloadMost equity funds charge an entry load of 2.25 per cent of investment. If you were investing 5,000 a month through an SIP (systematic investment plan), you would end up paying Rs 20,250 as load. Sebi has proposed to do away with this charge if you invest directly or through the Internet. Since more money goes to invest for you, you end up with a lot more over long periods of time.

http://www.expressmoney.in/news/No-distributor-no-load/91430.html