Zerodha Will Keep Direct Mutual Fund Plans For Free Says Nithin Kamath

Zerodha founder Nithin Kamath said the company will continue to offer direct mutual funds for free, even as several platforms that started with the same model have either shut down, changed direction or are rethinking the business.In a post on X, Kamath said Zerodha’s pricing philosophy has remained the same since it launched the discount broking model in India in 2010. The company decided then to charge a flat fee per trade, regardless of trade size, because the effort required to execute a small trade and a large trade is the same.“When we started the discount brokerage model in India in 2010, we decided to charge the same fee regardless of trade size. The logic was simple: if the effort to execute a trade is the same, why should customers pay differently?” Kamath said.He said the same thinking was later applied to mutual funds. Zerodha did not launch mutual funds until it could sell only direct plans, he said.Direct mutual fund plans do not carry distributor commissions. Regular plans, on the other hand, include commissions paid to distributors, which can reduce investor returns over time. The difference may look small in the beginning, but can become meaningful over long holding periods because of compounding.Kamath said a broker cannot call itself low-cost if it charges a percentage fee on transactions.“You can’t call yourself a discount or a low-cost broker if you charge a percentage fee on transactions, because there’s no incremental effort in executing a larger order,” he said.He said this principle has shaped Zerodha’s product and pricing decisions from the beginning.According to Kamath, Coin by Zerodha is now the largest direct mutual funds platform in India, with nearly Rs 1.6 lakh crore in direct mutual fund assets under management. He said Zerodha customers have saved “thousands of crores” in commissions by investing through direct plans.“Direct mutual funds are a no-brainer if you’re a DIY investor,” Kamath said.The comments come at a time when mutual fund investing has become a major part of retail financial savings in India. Systematic investment plans have helped bring millions of new investors into mutual funds, but many investors still do not know whether they are investing in direct or regular plans.Kamath said this lack of awareness remains a problem. He advised investors to check whether their mutual fund investments are in regular or direct plans. He added that Zerodha can help investors who want to switch from regular plans to direct plans.The post also points to a broader shift in India’s investing industry. Several fintech platforms entered direct mutual funds in the past few years, but many later moved to other products or changed their revenue models. Direct mutual funds are popular with investors because they are cheaper, but they are difficult for platforms to monetise because they do not generate distributor commissions.Kamath said most direct mutual fund platforms that started around the time Zerodha launched Coin have either disappeared or moved to other businesses. Some of the remaining platforms are also reconsidering their decision to offer direct plans, he said.