Ch.6 · Distributor Commission Structure · hard
Over a 20-year period, if a Regular Plan has 1% higher annual TER than a Direct Plan, approximately how much more wealth does a Direct Plan investor accumulate on a ₹10 lakh investment growing at 12% CAGR?
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EXPLANATION
At 12% CAGR over 20 years, ₹10 lakh grows to about ₹96 lakh. At 11% (1% lower due to Regular Plan TER), it grows to about ₹80 lakh. The difference is approximately ₹16 lakh — and at higher investment amounts or longer periods, this gap widens significantly, demonstrating the compounding impact of cost differences.
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