Do lower costs help investors create more wealth? Know from the expert
The “Wealth Wise Series” with Mirae Asset Mutual Funds covered different aspects of wealth creation, including through passive investment strategies. The last session on “The Impact of Cost on Investors’ Portfolio” aimed to raise awareness of how investors can build a portfolio with cost in mind.
Umesh Kumar Daila, Head of ETF Sales, Mirae Asset Investment Managers (India) Pvt. Ltd shared his view on why investors should consider the cost of a fund before investing:
” Keep an eye on
Total expense ratio (
TER) while investing, is very important from an investment perspective as it has an impact on (overall) returns.
Indian investors are gradually turning to profitable products like ETFs, a trend that has accelerated in recent years.
“The large cap category in India has underperformed the large cap benchmark by a huge margin, which is why investors are becoming increasingly aware of this type of expense ratio that is charged to these funds. , where the underperformance is quite obvious”, Daila explains.
Explain how low cost helps ETFs become more popular. Daila gave four main reasons:
- The government has started to use ETFs as a preferred channel for divestment, which has led to increased participation from retail investors.
- ETFs are used by EPFO and private FP organizations to gain exposure to the equity market.
- The declining alpha of active funds has made average investors aware of the benefits of plain vanilla products such as Nifty or Sensex ETF.
- Finally, regulatory measures such as fund categorization as well as benchmark yield have also contributed immensely to its popularity.
An investor should create a mixed portfolio – with an active fund which can be a benchmark – as well as low-cost, broad-based ETFs so that the investor does not run the risk of underperforming the benchmark . ”
Ultimately, the goal of an investment is to create sustainable wealth through a combination of actively managed funds and ETFs. A combination of active and passive funds can give you the best of both,” Daila said.
The session looked at investing in ETFs and other passively managed funds with equity exposure through mutual funds. Click here to watch the full session.