Lies, Lies and Honest Lies
We all know who writes columns of lies, lies and honest lies, so here is a dig…
Look at the Quantum Mutual fund advertisements which appeared in the national press. The advertisement says “we have eliminated distribution commission…” so your money works for you.
There are 2 types of charges that a customer pays in a mutual fund scheme. One is the sales cost and one is the management of funds (amc cost).
Whether right or wrong, it was SEBI that abolished the ‘sales costs’ also known as ‘entry load’. Only person who can take credit for this (rightly or wrongly) is the ex-chief of SEBI, Mr. Bhave.
The asset management charges of most mutual funds is in the region of 2.5%p.a. – however as there is a sliding scale the bigger funds charge less. So while a quantum mutual fund would charge you 2.5% p.a. some funds like Hdfc Top 200 would charge you 1.86% p.a. This means there is a saving of 0.64% – and this gap would keep increasing.
If you go to www.myiris.com, www.moneycontrol.com, www.valueresearchonline.com – you will be able to find out whether Quantum was the best fund to invest or whether it was Top 200, I pru Discovery, I pru Dynamic, Reliance Growth…YOU need to take the call.
The ad then says ‘We did not launch numerous schemes to please the distributors’ – well Tata Mutual fund got the name of a ‘New scheme factory’ – valueresearchonline.com gave them that name. Sure many fund houses launched many schemes, but the client SHOULD have exercised the OPTION of not investing, is it not? In a crowded market it is the MARKET’S job to separate the men from the boys…
hmmm…
am expecting distributors of national level at Chennai to react to this news item!
Sambaran Mitra
@Rajesh Manoharan,
Can you please have a look at http://www.moneycontrol.com/news/mf-experts/the-truth-about-mutual-fund-dividends_425600.html
I will like to know if that answers your thoughts/concerns. I myself had a very mistaken notion about mutual-fund-dividends (as opposed to share dividends). Some articles (which essentially said the same thing as the link I mentioned above) helped me in understanding the truth about mutual fund dividends. After that I never considered dividend payout as a factor for judging an equity mutual fund.
Srikanth
I like them for having come up with a no entry load fund
even before SEBI mandated it. Also the fact that QLTEF
has performed well and has continued to lower expenses
as the AUM has increased.
It is tiring to see the constant chest beating though.
One thing that I haven’t seen discussed here is the 0.75%
expense ratio charged by their Equity Fund of Fund offering.
In a fund of fund situation, since QuantumAMC would be
the distributor, aren’t they pocketing the upfront fees
and trail fees distributed by the underlying AMC ? If so
shouldn’t the FOF offering itself be much less expensive
that 0.75%. Granted it is still competitive compared with
other FOFs, but with all that talk about low cost, I would
have liked to see a much smaller number.
John Thomas
Dear Srikant,
Valid question.
As QLTEF investor, I know that they are ploughing back exit fee to the fund corpus whereby existing unit holders are getting benefitted with higher NAV at the expense of drop offs.
Likewise, let’s assume for now that they are honest enough to plough back at least trail fees back to the FOF corpus.
In my personal opinion there is no reason for us to invest in Quantum FOF’s. Majority of MF investors are having exposure to multiple AMC’s and schemes. Among them Prashant Jain’s HDFC Top 200, HDFC Equity etc are so popular as well. As such why do we need to invest in Quantum FOF and end up paying additional .75%. They are also relying upon time tested funds such as HDFC Top200 and Equity.
Let’s not discuss other factors such as the impact of dividend distribution tax on FOF’s. MF experts like Dhirendra Kumar can through more light on the negatives of FOF’s.
@ common investors.
As we all agree it is now so simple to transact through web and tons of readymade and accurate information is available free of cost to all of us. Let’s all make use of the free information available off the shelf to meet our own goals.
There are many more good informative sites to mention but do we all have time to go through each one after hectic office hours?
If one is young, shrewd and does have a flair for stock market and does have enough time to research and follow up, may stay away from MF’s altogether and invest directly in stock market – of course with the help of free information available off the shelf. Touch only few scrips (which you can review throughout the year) with somewhat good corporate governance and do not discriminate between small / mid / large caps – to follow unbiased, non emotional selection path. Your return may not be that astronomical since not into gambling but the risk element will be under control.
These are purely my personal views only and if not 100% confident, one (especially youngsters who are new to this Financial Jungle) should not follow “do it all yourself” formula and burn the fingers in the stock market. For them MF is the best option. I do not have time to research and follow up and hence inactive in stock market since I have learned the basics during Harshad Mehta’s time.
Srikanth
Hello,
Just so nobody is confused, the Srikanth who commented above about FoF is not me.
(About the comment itself, I think there is a legislation from SEBI wherein the FoF does not get to make any upfront or trail fee from the funds that they invest in. Not sure, though…)
Thanks,
Srikanth
FundsIndia.com
Muthu
To my knowledge, as per current norms, exit loads have to be credited for investors’ education and not back to corpus.
For lovers of Quantum, I would still suggest you to diversify your investments into to few funds. One may have total of 5 to 6 funds in his portfolio and monitor them less frequently.
In my opinion aggregator sites like FundsIndia would be useful for ‘do it yourself’ investors.
But too many variants in mode of SIPs are making a simple system more complex. Complexity does not add to one’s wealth.
I’ve clients who have been with ICICI Direct and have moved away from them.
Advising is not only about comprehensive financial planning, offering products and services, and answering periodical doubts.
The most important factor is influencing the behaviour of investors. Lot of counselling needs to be done in bad times as people pull out money or stop SIPs precisely when they should not be doing it.
Having an advisor and seeking his opinion helps avoid impulsive decisions on investments, borrowing etc.
I’m not sure if the need of an advisor can be eliminated, though I’ve vested interest in saying it.
If there is no need, then probably I can back to BPO or teaching. Or may be seek an employment with aggregators like FundsIndia. You see I’m not rich like Mr.Subra’s broker who has enough money for next 725 years! Long live his broker!
Raghupathi
Thanks Subra for this post and all others for an open discussion on the same. I think, this post of Subra must have got the highest feedback from the readers so far..
Sarath Chandra
What is the concluding advice at the end of the discussion?
Should a prospective investor go for QLTEF or check out someother fund?
bharat shah
concluding thought (not advice!) being existing QLTEF investor(biggest investment mf in our portfolio!): salute to pioneer of no entry load for mf in india. however investment is different than saluting! so have other amc’s schemes should be part of portfolio, as beside other considerations, we should rememember that we are living in a country of satyam, and for wider geogrophy ,in universe of enron and others! and for time being ,be unnerved though the constant marketing for their (its sister concerns’) numerous stock selection services! it is just opposit to boast for having only a few mf schemes! hoping their research would better reflect in QLTEF.
Sarath Chandra
@Bharat Shah: thanks for the thought! Certainly makes a lot of sense.
Guest
My only concern is that, QLTE fund has NOT declared dividend since from inception in dividend option !!!!!!
They say that investors should pay dividend for themselves, but then an exit load of 2% will be charged and enjoyed 🙂
What kind of fund house is this [ Quantum mutual fund or AUM }
subra
if you feel trail is so bad that you will NOT PAY trail…you should also not build a business where YOU receive trail. When you do a FOF, you pocket the trail, right?