Does lower cost help investors create more wealth? Know from the expert


Can cost of funds impact your portfolio returns? To explore the role and impact of cost on your portfolio and how lower cost can help in creating more wealth, Economictimes.com conducted an
exclusive session recently.

The “Wealth Wise Series” with Mirae Asset Mutual Funds has covered different aspects of wealth creation, especially through passive investing strategies. The latest session on “
Impact of cost on investors portfolio” was aimed at spreading awareness on how investors can create a portfolio keeping cost in mind.

Umesh Kumar Daila, Head ETF Sales, Mirae Asset Investment Managers (India) Pvt. Ltd shared his views as to why investors should consider the cost of a fund before investing:
“Keeping an eye on the
Total Expense Ratio (
TER) while investing, is very important from an investment perspective as it impacts the (overall) returns.”

Indian investors are gradually moving towards cost-effective products like ETFs, a trend picking up in the last few years.

“The large cap category in India has underperformed the large cap benchmark with a huge margin, hence the investors are becoming more conscious about that kind of expense ratio which is being charged to these funds, where the underperformance is quite evident,” explains Daila.

Elaborating on how low cost is helping ETFs get more popular. Daila gave four major reasons:

  1. Government started using ETFs as a preferred route of disinvestment, which has resulted in increased participation of retail investors.
  2. ETFs are being used by EPFO and private PF bodies to take exposure into the equity market.
  3. The shrinking alpha in active funds has made average investors aware about the benefit of the plain vanilla products like Nifty or Sensex ETF.
  4. Lastly, regulatory measures like categorization of funds along with benchmark return has also contributed immensely to its popularity.

An investor needs to create a blended portfolio – with an active fund which can be a benchmark – along with low cost, broad based ETFs so that the investor doesn’t run the risk of underperforming the benchmark. “
At the end of the day, the goal of an investment is to create sustainable wealth with a combination of actively managed funds and ETFs. A combination of active and passive funds can provide you with the best of both,” said Daila.

The session elaborated on investment in ETFs and other passively managed funds with equity exposure through mutual funds.
Click here to watch the full session.



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