P014- Biggest mistake an MF investor can make

[rski]

@pmiller Yup , I feel bad for fellow investors . Many would have invested after redeeming something else and getting hit by STCG / LTCG .As Indians we have no social security equivalent to speak of . If savings are subject to this then god help us .

High decibel marketing swinging people into expense traps and impact cost traps . Zero value addition .

 

[jay256]

@rski Would NPS count as social security?

 

[rski]

@jay256 Barely , in the same way a thong is an article of clothing and ketchup is counted as a vegetable

 

[jay256]

@rski Can you give some concrete reasons, I am still a noob when it comes to this?

 

[rski]

@jay256 The average social security benefit paid out in the USA is about $1543/ - per month . Most people draw upwards of $3000 a month assuming they had a regular course of employment and retired at 60 .

Plus there is the 4 part Medicare coverage .

Compared to that NPW is like a pack of ketchup

Edit : but as long as a thong makes you happy or a sachet of ketchup ,it’s NPS yay yay all the way fla

 

[beaniebabie2]

@rski I once tried to convince my friend regular didn't make sense. But he was simply too adamant and ignorant. After around 10 mins I gave up. Pinged him today to check if he still invests in Regular

 

[earthmover]

@rski The point applies to any mf investment and not just NFO. However bulk of money by the AMCs is still collected via distributors through regular schemes. I came to know about this when I was going through annual report of a fund house which they send to all their investors each year. One thing which I had observed is that these distributors aren't just MF distributors. They are often distributors for insurance and provide other services like Filing returns as well for which it is always helpful to keep someone you know who can guide you at the time of emergencies.

 

[rski]

@earthmover And that’s absolutely fine . They perform a service.

The proposition is simple

Is one willing to accept 8-9 x higher expenses in return for it ?

Remember - the investors gain are in the wind , he may or may not gain

The distributors commission is certain , he gets it irrespective of the investor gaining or losing .

.18 % in direct
1.77 % in regular

What we are seeing is the age of a new dawn in investing where one set of investors and the Amc will support the distributor and subsidise the direct investor.

Now I am going to change my investing style . I will look for the relative expense ratio of regular vs direct . If I see a subsidy being gifted , I am more likely to take it provided other things are equal.

And I will express my gratitude to the regular plan investor for subsiding me .

Just like I thank the millions who enter the markets each bull run and hand over their gains to patient long holders like me .

So far I have expressed my gratitude to the retail trader , now I will express it for the regular MF investor .

I have no doubts that going head for each NFO this will be the trend

Now if someone comes up with a bank nifty fund with a .60 TER for regular and 0.001 for direct that would make my day

 

[earthmover]

@rski Well you're true on that part but the subsidy part isn't true. The TERs of direct plan are the actual costs Mfs incur. In a way that is the only cost a fund house incurs. That is the same both for direct and regular. The difference is actually the cut/fee for the distributors. That goes all directly to them. The fund house doesn't get anything from that.
Ps I don't think a TER can go low to 0.001 but maybe we can hope for 0.01 atleast. That would still be good enough.

 

[rski]

@earthmover Refer SEBI formula

Direct Plan TER = Regular Plan TER - Commission paid

I feel you , but the SEBI formula has nothing to do with actual cost of direct plan

Even I could not wrap my head around it for a week

 

[earthmover]

@rski Yes so what's wrong in that. There would be costs involved even in direct plan.