shammysdad
New member
TL;DR – For >1 year investments, lower annual costs for ETFs cover up for the higher transaction costs due to price-iNav mismatch.
Update: as /@zashmaster pointed out, Tracking error includes TER. So while calculating the annual costs - have only considered the tracking error now.
Hi everyone,
Basis last 5 yr market returns, and personal preference I have decided to move to passive investing. Now in passive investing, I had 2 options Index funds and ETFs. Have gone through this forum as well as numerous reports mentioning Index funds are better primarily due to liquidity available + lower transaction charges so decided to test it out.
In the last week, have monitored the iNav and prices for the top ETF (by volume) and the variance ranged from 0.05% (rest) to 0.25% (Nifty Next 50, IT, Bank) + the volumes were on par with a nifty 20 stock. This got me thinking, IF in fact ETFs could be the better choice. [iNAV to price difference was done manually, in case of better method, do share]
Have drawn up the summary of the Annual + Transaction charges for ETFs vs Index funds. DO let me know what you guys think about this and if I am doing this right
Assumptions:
b) For Mutual funds, given the recent changes, the NAV for SIPs would be at best T+2 (One click mandate T+2 settlement), thus we are losing out the returns for atleast those 2 days. Have added the impact of 2 lost days (assuming simple growth rate)
c) STT = 0.001%, Stamp = 0.005%, Brokerage = 0 (discount brokers), SEBI = 0.015%, Transaction = 0.0069%+GST
Analysis:
Index
ETF
Annual costs (tracking error only)
Transaction costs
Index Fund
Annual costs
Transaction costs
NIFTY 50
NIFTYBEES
0.18%
0.12%
UTI
0.30%
0.10%
Nifty Next 50
JUNIORBEES
0.22%
0.52%
ICICI Prud
0.45%
0.10%
Nifty Midcap 150
NETFMID150
0.63%
0.12%
MOSwal M150
1.10%
0.12%
Nifty Small Cap 150
N/A
-
-
MOSwal S250
1.07%
0.09%
Nifty IT
NETFIT
0.13%
0.32%
-
-
-
Nifty Bank
BANKBEES
0.86%
0.32%
MOSwal
2.20%
0.12%
Nasdaq 100
N100
0.21%
0.12%
MOSwal N100 FOF
0.64%
S&P 500
N/A
-
-
MOSwal S&P
0.49%
China
N/A
-
-
-
-
-
Update: as /@zashmaster pointed out, Tracking error includes TER. So while calculating the annual costs - have only considered the tracking error now.
Hi everyone,
Basis last 5 yr market returns, and personal preference I have decided to move to passive investing. Now in passive investing, I had 2 options Index funds and ETFs. Have gone through this forum as well as numerous reports mentioning Index funds are better primarily due to liquidity available + lower transaction charges so decided to test it out.
In the last week, have monitored the iNav and prices for the top ETF (by volume) and the variance ranged from 0.05% (rest) to 0.25% (Nifty Next 50, IT, Bank) + the volumes were on par with a nifty 20 stock. This got me thinking, IF in fact ETFs could be the better choice. [iNAV to price difference was done manually, in case of better method, do share]
Have drawn up the summary of the Annual + Transaction charges for ETFs vs Index funds. DO let me know what you guys think about this and if I am doing this right
Assumptions:
- Only the top ETF, Index fund considered – primarily by AUM + (for ETFs) daily txn volume
- Annual costs include Total expense ratio (TER) + tracking error.
- Tracking error would be negative for MFs – as they need to hold cash for redemption, and could be positive or negative for ETFs. Have assumed the worst case for ETFs with tracking error leading to lower annual returns – thus have added tracking error to the annual costs.
- Transaction costs include STT + Stamp for MF, and STT + SEBI + Stamp + Transaction + Brokerage charges for ETFs.
b) For Mutual funds, given the recent changes, the NAV for SIPs would be at best T+2 (One click mandate T+2 settlement), thus we are losing out the returns for atleast those 2 days. Have added the impact of 2 lost days (assuming simple growth rate)
c) STT = 0.001%, Stamp = 0.005%, Brokerage = 0 (discount brokers), SEBI = 0.015%, Transaction = 0.0069%+GST
Analysis:
Index
ETF
Annual costs (tracking error only)
Transaction costs
Index Fund
Annual costs
Transaction costs
NIFTY 50
NIFTYBEES
0.18%
0.12%
UTI
0.30%
0.10%
Nifty Next 50
JUNIORBEES
0.22%
0.52%
ICICI Prud
0.45%
0.10%
Nifty Midcap 150
NETFMID150
0.63%
0.12%
MOSwal M150
1.10%
0.12%
Nifty Small Cap 150
N/A
-
-
MOSwal S250
1.07%
0.09%
Nifty IT
NETFIT
0.13%
0.32%
-
-
-
Nifty Bank
BANKBEES
0.86%
0.32%
MOSwal
2.20%
0.12%
Nasdaq 100
N100
0.21%
0.12%
MOSwal N100 FOF
0.64%
S&P 500
N/A
-
-
MOSwal S&P
0.49%
China
N/A
-
-
-
-
-