Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications

Friday, May 31, 2013

ETFs Can Get Returns On Par With Market

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

Low expenses ensure that such passive funds don't disappoint investors


John C Bogle, the US born legendary mutual fund veteran always insisted on bringing down the costs of fund management for the simple reason that any savings on costs by the mutual fund scheme that you have put your money in would add to the corpus. And in the long run, this could make a substantial difference to the total corpus you accumulate compared to what you would have got if the costs were higher.


The result of such a logic was the launch of exchange traded index funds, popularly known as exchange traded funds (ETFs), although late ly other types of ETFs have also been launched in the market with varied degrees of success.


ETFs are usually passively managed funds, meaning these funds track some bench mark index or the price of some physical or financial as sets and, unlike regular mutual funds, do not try to out perform their benchmark index by regularly buying-selling the portfolio of stocks.


So, ETFs naturally come with much lower costs compared to actively managed ones. In India, the average costs for ETFs could be in the range of 0.50-100 basis points (100 basis points = 1 percentage point) per annum. Compared to this, actively managed equity funds can charge up to 2.80% per annum. As a result, over the years, not only the savings on costs would get compounded, even the performance would get compounded and adds to your portfolio.


Supporters of the active fund management style often say that good fund managers can beat the market and give you higher returns, but the fact of the matter is at times even the best of the fund managers also underperform the market. One of the best things about ETFs is that if you are invested in an ETF, you would get a return that is on par with the market.
The chance of you being disappointed with your re turns in comparison with the market returns is very low according to an official at a domestic fund house.


Gold ETFs outshine others


Some of the basic attributes to look for while selecting an ETF are liquidity (how quickly you can sell your ETF without adversely affecting its market price), expense ratio (lower the expense ratio, better managed it is) and tracking error (the variance of its NAV from its underlying benchmark).


In India, of about Rs 13,000 crore worth of investors' money that is invested in ETFs of various types, about Rs 11,000 crore is invested in gold ETFs. The balance is in various other types of ETFs, like the ones which have an underlying market index, some sectoral indices, or some foreign indices.


Of the total 20-25 ETFs available in India, a majority are gold ETFs, catering to the huge popularity of gold as an investment for a large number of Indians. Globally, however, the scenario is quite different. In the US for example, the inflows into ETFs of all types together, of late, are surpassing the inflows into mutual funds. The main reason for the muted response to ETFs in India is that distributors get no commission for selling these products. In comparison, these distributors earn about 70-80 basis points per annum as trail commission for selling equity and hybrid mutual funds.


In the case of ETFs, brokers can get brokerage co mission when they are bought or sold on the exchanges. But in India, brokers mainly thrive on frequent buying and selling by their clients while the same does not (and should not) happen in the case of ETFs, veterans of the ETF space say. Since they (distributors) don't get commission, they don't sell passive funds.


So, a new model is being tried in the market. Under this, you as an investor would be required to pay the seller/distributor of the ETF while the seller/distributor will not take anything from the fund house whose scheme is being sold. In this way, the seller/distributor will be answerable and responsible to the investor fully rather than running after higher commission from the fund house and often trying to sell mutual fund schemes to an investor which may not be the best fit for his/her financial needs and risk profile.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

No comments:

Post a Comment

Mutual Fund Application Forms Download Any Applications
Invest in Tax Saving Mutual Funds Invest Online
Infrastructure Bond Application Forms Download Applications

Popular Posts