Avinash.tech(…)

We covered Index Funds in detail earlier. Let’s see why Index Fund is a better choice if you are planning to invest in Mutual Funds.Indian market is growing at an astronomical rate. But none can predict which sector in India will outrank the other. For a know nothing investor it’s a better bet to diversify and invest in all the sectors available.

“Passive managed Fund Sahi Hai !!”

“Sahi Hai” means correct choice in Hindi.

Indian Index Funds and growth ?

There has to be a logical reason behind world’s superpowers trying to invest in India. Most of the retirement funds are moving their investment to India for the potential Indian Market has. 

Here is an Oxford Economics report stating the obvious. Fastest-growing cities in the world 2019-2035 are all in India.

Rank	City	Nation	Annual Growth Rate ( % )
1	Surat	India	9.17
2	Agra	India	8.58
3	Bengaluru	India	8.5
4	Hyderabad	India	8.47
5	Nagpur	India	8.41
6	Tiruppur	India	8.36
7	Rajkot	India	8.33
8	Tiruchirapalli	India	8.29
9	Chennai	India	8.17
10	Vijayawada	India	8.16

Source: Oxford Economics

We will try to debunk some of the common arguments people give when asked “Why are we not investing in an Index Fund?”.

Case 1 : My Financial Advisor never speaks about it !

The world out there is after your money. This has always been the case and will probably never change. Financial Advisors get a commission from the Fund Houses for onboarding you to a Regular Fund. They also charge extra for suggesting you such a fund. A win-win situation for them being a double Agent. Advisors are only worried about commission and these commissions that look small on paper can eat up as much as 45% of your total returns on a longer run! They would always push you towards a Regular Mutual Fund which has twice the fee compared to that of a Direct Mutual Fund.

For Example: ABCD bank will offer only ABCD BLUECHIP funds (Regular) even if those funds are sold by their Sister concerns ABCD Securities. ABCD Securities will pay a commission to the Advisors of ABCD Bank. Such is the state of Mutual Fund in India. I recently met with a Branch Manager and when asked why they don’t sell Direct Funds , he shut me off and diverted the topic :D.

A great speech by the legend !

Everyone is doing a SIP, but hardly anyone is happy with the returns they get. 

Only 51% investors stay more than a year in Mutual Funds. 

They either switch to a new shiny one giving more returns ( which will cost 3% change fee) or just stop investing feeling cheated as their dreams of becoming crorepati looked grim.

Stay away from these Financial Advisors who are nothing but leeches in disguise. They will never suggest an Index Fund as they get ZERO commission for it. Index Funds are passively managed funds with Fee as little as 0.1% , all they do is mimic the market. No Advisor or Fund Manager has much work to do! There are very few Fiduciaries in India and most Financial Advisors will hang someone out to dry ! Just stay away from these leeches !

Q: What does passive Fund mimics the market mean? A: True to the word mimic , A passive fund like Index Fund tries to stay close to the Top 50 companies and closely tracks their market cap or progress. When a company does not do well , it automatically exists in the Top 50 and the next company in line takes its place. No Fund Manager is needed to pick the best as this process is automated based on merit basis. Imagine this to be a report card that devices the ranks of students in a school.

Back to reading index: https://avinash.tech/investment/

Please read the disclaimer carefully before making any investment based on the articles published on this Blog !!