The best products are the ones you BUY, not the ones you are SOLD

Any "financial advisor", "financial planner", "relationship manager", "portfolio advisor", etc. will insist that you should have a significant portion of your assets in equity (based on your risk profile). However, the implementation of that allocation will always be using diversified mutual funds (which will charge 2.25% entry load & 2.0-2.5% expense ratio). In all likelihood, the funds will be selected from rating guide that is for "private circulation" and will contain only those funds that they have a tie-up with for distribution. Better yet, the rating guide can be done away with by picking up closed ended funds with no entry load (but you would have to pay upto 6% as initial issue expenses over the tenure).

The reason for investing in equity is robust - they deliver long term returns and Indian economy is expected to perform "well" for a decade or more. Mutual fund route provides adequate diversification and convenience, for a fee. However, what I do not understand is this - if I'm betting on Indian economy, should I not invest in an Index Fund or ETF? Your question is sure to infuriate/frustrate the "agents" (that is what they are, despite the glorified designations). The best performing diversified fund has given more than twice the return of the index, they claim. However, it is impossible to pick a winner among the diversified funds (considering their wide range of performance). The winners change frequently, which is good for the agent, as they can now recommend you to switch funds (usually called "churning") and increase their commissions on next purchase.

Here is the required dose of reality - provided you are happy with returns commensurate with Indian market (and accept that you can't beat it for sure).
* ETFs have to be bought from the market (if you are a small investor) or directly from the fund house (if you are a very large investor) - in either case, there are no commissions to be made at the time of purchase (via entry load), or retention (via trailing fees). These are best for large one-time purchases (around 1 lac).
* Index Funds have entry load of 0% (for a few funds) or 1% (for most - though I wonder how they manage to get investors). This is usually set-off via exit load for short-term redemption. The expense ratio is about 1% (or less for few funds) to 2% (again, I wonder how they manage to get investors). The combination of these low fees ensure you get market return minus expenses in the long term, while your agent gets low trail commissions only. These are best suited for regular investing with low amounts (around 1000 per month)
Note: Your success - inevitably leads to - your agent's failure. You get what you don't pay for...

Entry Load - Paying for service you don't receive

I do not trust distributors as I do not feel they can provide unbiased advice and I do not feel they are providing any worthwhile service that entitles them to their commission (which I learn is more than the entry load!!!)

As a result, I conclude that investing directly with the fund house is the right thing to do. However, the surprising thing is that I need to pay entry load - even if I am investing directly. The question is - if I am not using the distributor, fund house is not paying commission, then what is the entry load for??? Can I assume that the distributors are paying some reverse commission to the AMC employees so that direct investment can be discouraged?

Has anyone been able to negotiate a reduction or waiver in entry load with the AMC on the ground that he is investing directly & not via a distrubutor? If so, please post your experience in this regard.

Entry Loads & Annual Expenses - Oligopoly at its worst

Just one look at the offer documents & reports of MF schemes (or even a quick check on Value Research) will lead you to believe that 2.25% entry load for equity schemes is a law.

What is the point in SEBI prescribing that entry load is AMC decision with a cap of 7% as the max entry load - when it does nothing to encourage competition in this regard?

Also, the expense ratio of all funds is planned as 2.5% (same as max allowed by SEBI). Not only this, the actual expense also invariably stay as close to max limit as possible for more than half of the equity schemes.

Over and above this, all NFO expenses (thankfully for closed-end funds) always are planned at 6% (again, the max allowed by SEBI). Is this competition or group monopoly???

Is it possible that AMFI is nothing but a cartel that allows all MFs to decide uniform loads & expenses in a closed door meeting before launching it to the rest of the world? Any thoughts...