There are many people who write in to say ‘I do not like mutual funds’. Fantastic. What is your choice?

Out of about 4000 investors / traders whom I have met over the years not more than 50 are/were capable of beating the index regularly over long periods of time. The statistics is against you dude, go get a good fund scheme and do a SIP.

People do not like the fact that mutual funds charge too much for managing your money. True, they do charge anywhere between 150 basis points to 250 basis points….is that too much?

Well the NPS – the nano of the fund industry charges much lesser at .0009. However let me repeat this for the Nth time. Costs are not everything. Fund schemes like Hdfc Top 200, Kotak K 30, Icici Pru Discovery, I Pru taxplan, Hdfc Equity fund, Hdfc Prudence, Franklin India Bluechip, Franklin India Flexicap, Templeton India Growth Fund, – there is a whole list there which charges much, much higher than a NPS fund. And in spite of the fact that the charges ehre are higher, my returns would be higher than an NPS  scheme, INSPITE OF THE COSTS.

So even though we all know costs are important, competence of the fund manager, and his integrity are far more important than costs.

Take a real life example! Do you remember a dentist who over charged you or a dentist who damaged your teeth? Somewhat similarly I refuse to buy the theory of costs. Yes costs are important and relevant AFTER i have made up my mind about which INDEX FUND to invest. Then I would be looking towards the cheapest fund with the least tracking error….but that is not a concept of an active management fund.

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  1. Subra,

    Exactly. Value and Price. Price is what you pay and value is what you get.So if by paying the price, one is able to get the value, then the cost paid is fair. However, penny wise and pound foolish is what typical human behaviour throws up.

  2. My simple funda is.. if I get return return.. I dont mind giving MF fees (I mostly own MFs only)

  3. good idea Dheeraj.

    I want a life insurance policy. If the claim happens, they can adjust the premium…if there is no claim, I will not pay any premium.

    it is easy to design such a product. Only problem is premium will be equal to the claim.

    A mf will incur costs including fund management charges – the risk is on the owner. In a year when a fund does well will you agree to say a 30% of the profits as fees? You will not

    So when we say a MF is professionally managed it means it is professionals who manage the fund, not the owners.

  4. Example given by u is of Topper, which we can count on fingertips, what about those fund which not peroformed but they were on hot cake list of those if we count they will be more than in lacs, In given exampled by u these inception date of fund were in 1980-1990, were market were just like child, when we see the child when he born..after 5 yrs. when we measure performance in the terms of height, weight, size ..we glad & get satisfaction–when we see after 10 yrs. again we glad & get more satisfaction–after again get satisfaction when child again grow–year by year—but when he became MAN (MARD) get more & more satisfaction –but after that whenerve u measure his height, weight, size–u will get disappointment –because no growth anywhere–or may reverse–like that Market now became MARD, now our economy comes under top 11 –it is even difficult to get 10% return with 100% risk from mutual fund year over year. Today scenerio of Mutual fund –Mutual fund Instituion came down to 43 to 22.. No. of mutual fund even surrendred their licenced—Bharti Axa looking to sell their Mutual fund institution still not getting buyer. Entry & Exit load removed result into broker run away & not even suggeting their client for mutual fund.. sebi became very rude & said whenever u gives ad on TV –with slow speech instead of fast speech “Mutual fund is subject to market risk–pls read all documents carefully before investing—get FD return between 8 to 15% without risk.

  5. dawood u had open ma eyes about mutual fund wat subramoney had to say abt MF all BULLSHIT the EG:- given by dawood is awesum and it justify the market which is performing nw dayz……..subramoney BLAH BLAH BLAH………LOL how much u have na gained in ur childhood and ur present jst compare n see the difference u wll cum to knw abt all ur BULLSHIT u hv thrown on webpage…….DAWOOD I M GLAD TO SEE UR eg: abt MF

    SUBRAMONEY BLAH BLAH BLAH BLAH………….if ur so much bullish abt the market den invest with 100% risk what ever u hv earned till nw i ll gurantee u tht u wll get 10.5% or may be less on ur 100% investment, nw days returns are comparatively low and most returns cum in negative eg:more of MF havig investment in RELIANCE IND…….and investment also increased for while when BHARAT Petroleum deal happen n every MF was expected to RIL SHARE GO UP FRM 1000 to 1500 bt in reality it cam down to 900…..and also MF ind reduce there investment by selling in loss……………

    nw u talk abt ur experience first u invest in this MF, hopefully when u get high returns on ur investment i ll pay ur 50% of ur invetment and peacefully will share returns equally sooo…….stop talking BULLSHIT …….on the WEB page

  6. dawood u had open ma eyes about mutual fund wat subramoney had to say abt MF all BULLSHIT the EG:- given by dawood is awesum and it justify the market which is performing nw dayz……..subramoney BLAH BLAH BLAH………LOL how much u have na gained in ur childhood and ur present jst compare n see the difference u wll cum to knw abt all ur BULLSHIT u hv thrown on webpage…….DAWOOD I M GLAD TO SEE UR eg: abt MF

    SUBRAMONEY BLAH BLAH BLAH BLAH………….if ur so much bullish abt the market den invest with 100% risk what ever u hv earned till nw i ll gurantee u tht u wll get 10.5% or may be less on ur 100% investment, nw days returns are comparatively low and most returns cum in negative eg:more of MF havig investment in RELIANCE IND…….and investment also increased for while when BHARAT Petroleum deal happen n every MF was expected to RIL SHARE GO UP FRM 1000 to 1500 bt in reality it cam down to 900…..and also MF ind reduce there investment by selling in loss……………

    nw u talk abt ur experience first u invest in this MF, hopefully when u get high returns on ur investment i ll pay ur 50% of ur invetment and peacefully will share returns equally sooo…….stop talking BULLSHIT …….on the WEB page

  7. For all those readers who want safe (LOL), and risk free returns of 8-15% (per annum I presume) and also will get your principal back (again I presume) please contact Dawood.

    want his address? Home Ministry does not have it, but some Taleban friend may be able to take you to him…last heard of he was in Pakistan.

    by the way, investments are subject to market risks. If it does well, he will keep it. If it does badly, you have already paid for it…LOL

  8. Mr.Subra- Some of the comments I see above both lack in substance and are also personally derogatory.

    I know that you do not moderate your comments. Nothing wrong if people have a different perspective on what you write. But how they put it across is also equally important.

    Some times, ‘moderation’ is a virtue in blog comments and it’s always a virtue in other walks of life as well!

  9. Muthu,

    the reason some of us do well in the equity markets is because most people do not understand how markets work. That will not change, I will continue my non moderating policy. It works. People know which comments to read and which to laugh at. You think such stupid comments will mean people will not want to read the blog? No my readers are super top class – forget Dawood – even P Chidambaram wants him 🙂

  10. Well.. its everyone’s take.
    But I still feel that ppl are more safe in MFs rather in direct equity. I bought good blue chip shares in 2007/2008 which dipped 40%-60%. But with my SIPs, my max loss was 25% -26% only (I dont do averaging in shares).

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