Skip to main content

Mutual Fund Costs

Invest Mutual Fund Online

Keep in mind these five points about mutual fund costs before you invest in a fund



Fund returns are net of all costs

When comparing mutual funds with other investments like ULIPs, note that the NAV-based returns of mutual funds are net of all expenses. In fact, the expense ratio is the only item of cost allowed to be (apart from the optional exit load) charged by the fund. What you see in the MF NAV is thus what you will get, both at the time of purchase and redemption. Now, ULIPs charge fund management fees to the NAV just like MFs, but they also levy a battery of other costs such as mortality charges for the insurance cover, premium allocation charges, which do not reflect in the NAV but are usually deducted from your investment before you are allotted units. When you redeem, ULIPs also levy surrender charges on top of the NAV. So if you're comparing a MF with an ULIP, don't just go by NAV returns alone.


Costs are levied on asset value
Comparing commissions or costs across MFs, ULIPs, bonds and other products? Well, check if the charge is on your initial investment or on the final asset value. It makes a big difference. A distributor commission of 1 per cent on your principal is a very different proposition from a commission of 1 per cent on your asset value. The latter will take a bigger bite out of your wealth, as it includes both your principal and your accumulated returns.


Expense ratio is a moving target
You may decide to buy a fund based on the expense ratio in its latest fact sheet. But while doing so, be aware that the ratio is not cast in stone. The fund is free to peg its expense ratio sharply up or down over time. On the debt side, schemes have even been known to kick off with a very reasonable looking expense ratio, only to hike it the very next year. Nor do fund houses have to take your permission to change their expense structure, as it isn't a 'fundamental attribute' of the scheme. All this means that you don't just have to keep an eye on fund costs when you invest. You also need to check back on costs every time you review your portfolio.


The B15 factor
If you thought your fund's expense ratio is just a function of its size and SEBI's slab structure, you're ignoring the B15 factor. In 2012, SEBI allowed funds to charge upto 0.30 per cent more in annual expense ratios, if they managed to source 30 per cent of new inflows or 15 per cent of existing assets from cities beyond the top 15 (known as B15 cities). Schemes which source lower flows also get to charge extra, on a proportionate basis. With B15 flows gaining traction in the last two years, B15 charges have helped fund houses pad up their expense ratios quite a bit. And it is the B15 factor which results in schemes sporting expense ratios that are not the standard 2.50 or 2.25 per cent, but much higher fractional numbers.


Smart beta ETFs are here
Active funds in India are expensive when compared to their Western peers, but ETFs aren't. While active large-cap funds sported an average expense ratio of 2.33 per cent in June 2016, index funds and ETFs averaged only 0.55 per cent for the same period. Yes, there are 1 per cent plus funds (open end index funds) in the category, but you also have ETFs from HDFC, Invesco, Reliance R*Shares and Edelweiss charging a modest 0.05 to 0.10 per cent a year to passively track indices. With the bourses rolling out 'Smart' indices (playing on Quality, Value, Dividend Opportunities and so on) that use quantitative filters to select stocks, fund houses have also begun to launch ETFs that mimic these indices. These offer a low-cost yet smarter alternative to plain Jane Nifty and Sensex tracking ETFs.



-----------------------------------------------
Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds

Top 10 Tax Saver Mutual Funds to invest in India for 2017

Best 10 ELSS Mutual Funds in India for 2017

1. BNP Paribas Long Term Equity Fund

2. Axis Tax Saver Fund

3. Franklin India TaxShield

4. ICICI Prudential Long Term Equity Fund

5. IDFC Tax Advantage (ELSS) Fund

6. Birla Sun Life Tax Relief 96

7. DSP BlackRock Tax Saver Fund

8. Reliance Tax Saver (ELSS) Fund

9. Religare Tax Plan

10. Birla Sun Life Tax Plan

Invest in Best Performing 2016 Tax Saver Mutual Funds Online

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

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

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300

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

 

Popular posts from this blog

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...

ULIP Review: ProGrowth Super II

  If you are interested in a death cover that's just big enough, HDFC SL ProGrowth Super II is something worth a try. The beauty is it has something for everybody — you name the risk profile, the category is right up there. But do a SWOT analysis of the basket, and the gloss fades     HDFC SL ProGrowth Super II is a type-II unit-linked insurance plan ( ULIP ). Launched in September 2010, this is a small ticket-size scheme with multiple rider options and adequate death cover. It offers five investment options (funds) — one in each category of large-cap equity, mid-cap equity, balanced, debt and money market fund. COST STRUCTURE: ProGrowth Super II is reasonably priced, with the premium allocation charge lower than most others in the category. However, the scheme's mortality charge is almost 60% that of LIC mortality table for those investing early in life. This charge reduces with age. BENEFITS: Investors can choose a sum assured between 10-40 times the annualised premium...

Bharat Bond ETF

Top SIP Funds Online   The government of India has paved the way for the launch of India's first corporate bond ETF called as Bharat Bond ETF. Edelweiss Mutual Fund will be managing it. The fund is mandated to invest in AAA-rated bonds of select public sector companies (see the table 'List of constituents and their proportions in the portfolio'). The government has a threefold objective behind launching this product. One, to deepen the liquidity of the Indian debt markets and provide a gateway for easy retail participation. Two, to solve investors' dilemma of picking premium bonds. Lastly, to help the underlying government-owned companies raise funding for their operations. But does it make sense for you, the investor, to invest in it? Lets find out. What is the product? As the name suggests, it is an exchange-traded fund which will be listed on a stock exchange from where its units can be bought and sold post launch. It will have two variants - one maturing in 3 ye...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now