Instead of worrying about the rating of funds, look at the fees that they charge. A well performing fund with a lot of aum is likely to be charging LESS than a smaller, but poorly performing fund. Of course this is because there is a ceiling on charges…but do remember…FEES ARE IMPORTANT, and of course competence..

Fees are important and over time they can be very costly.

An initial investment of Rs. 100,000 that grows 8% over 25 years would, at the end of that period, be worth  Rs. 734,017. However, if management fees reduced the returns by 2% annually, the investment would only be worth Rs. 446,496, reducing the value of the investment by almost 40%. Many people don’t realize that a fee that sounds as innocent as 2% can result in such a large cost over time. And sebi wants to make it 2.75% – wow!

When you are accumulating your money over a long period of time…fees can hurt.

However the sad thing is that cost alone cannot / should not be the criteria in choosing a fund scheme. You need to see the size of the portfolio, the median and average return over the years, the ability to beat the benchmark, the standard deviation of the returns….

HOWEVER IF you do not do all these things, you are better off looking at JUST THE COST…when you are seeing the list of fund schemes…the BEST COLUMN to watch is the ‘cost’ that the manager is charging. That is finitely better than the ‘rating’ column which you normally see!! (oops I am assuming that you go by rankings !!, if not thanks for reading my blogs on rating!)….

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  1. Hello,

    I am Myrina Stein and I am a member of some financial communities. I just visited your site and I am a frequent reader of your blog.The articles of your blog is really worth reading. The quality of your content is excellent.
    After seeing this, I would like to request you something. I love to write financial articles and I would like to contribute article for your site if you’ll give me the permission. I can give you an original guest post and I assure you that it will be published only in your site. If you want, you can suggest me the topic also and I will write accordingly.

    Please let me know your thoughts. Waiting for your positive reply. Reach me at: myrina (dot) stein (dot) 888 [at] gmail (dot) com


  2. dear subra

    can u summarize management fees of popular indian mutual funds like hdfc,pruicici,reliance,dsp blackrock,idfc or provide link to an article


    dr sanjay prabhu

  3. Is a fund charging 2.9% and giving 18% returns is better then a fund who charges 2% and gives 12% return????

    & is the return which we see are after deduction of these charges na???

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