How Should MF Investors Position For Next 5 Years?: Kalpen Parekh & Amit Kukreja Decode
Summary
TLDRThe Mutual Fund Show, hosted by Alex Matthew, discusses strategies for mutual fund investments amidst market volatility. The show features Kpin Parik, CEO of DSP Mutual Fund, who addresses concerns about recent SIP data and equity market trends. They delve into thematic funds' popularity and the importance of timing investments. Parik emphasizes the long-term benefits of equities and the stability of corporate India's growth rates, recommending hybrid portfolios to balance asset classes. Amit Kukreja joins the discussion, comparing ETFs and index funds, and advising on systematic investment plans for market dips and retirement planning.
Takeaways
- 📈 The mutual fund show aims to provide actionable information to help viewers make informed decisions when investing in mutual funds.
- 📊 Despite market volatility, the long-term trend of SIP investments has been strong, with a consistent flow of new investors joining the industry.
- 💡 The managing director of DSP mutual fund suggests that investors should focus on profit growth and return on equity (RoE) when considering long-term investments.
- 🤔 Concerns are raised about investors potentially buying into 'hot' themes at the peak of their cycle without understanding the associated risks and volatility.
- 🕒 The June 4th market dip highlighted issues with transaction cut-off times and the need for aggregators to ensure timely investment execution.
- 🌐 The importance of diversification in a portfolio is emphasized, suggesting a mix of equity, bonds, and other asset classes to mitigate overvaluation risks.
- 💼 Amit kukreja, the founder of am Amit cra.com, discusses the challenges of timing the market and the benefits of systematic investment plans (SIPs) over trying to capitalize on short-term market fluctuations.
- 💹 The script touches on the performance of thematic funds, which have delivered superior returns in recent years, attracting significant investment flows.
- 📉 The potential for missed investment opportunities due to cut-off times is acknowledged, but the long-term impact is considered minimal for disciplined investors.
- 🏦 The role of banks and financial institutions in facilitating real-time transactions is highlighted as crucial for investors looking to capitalize on market dips.
- 📝 A reminder that the costs associated with ETFs should be considered in the context of overall investment strategy, including brokerage fees and transaction costs.
Q & A
What is the main focus of the Mutual Fund Show?
-The Mutual Fund Show focuses on providing actionable information to help viewers make informed decisions when investing in mutual funds.
What was the recent experience in the equity markets that Alex Matthew referred to in the show?
-Alex Matthew referred to the 'chop and churn' in the equity markets over the last week and a half, which likely refers to significant volatility and fluctuations in stock prices.
Who is Kpin Parik and what is his role in the discussion?
-Kpin Parik is the Managing Director and Chief Executive Officer at DSP Mutual Fund. He joined the show to discuss positioning and portfolio management in the context of recent market experiences.
What is the significance of the SIP number mentioned in the script?
-The SIP (Systematic Investment Plan) number, close to 20,900 crores since July of the previous year, signifies the amount of new investments coming into the mutual fund industry, indicating a trend of increasing participation from new investors.
What does Kpin Parik suggest about the gross to net SIP ratio and its implications?
-Kpin Parik suggests that the gross to net SIP ratio, which is around 40 to 50%, indicates that while there are many new investors joining, there is also a consistent 'leakage' or closure of SIPs from existing investors, which is a common trend over a long period of time.
What was the total flow into Equity mutual fund schemes as discussed in the script?
-The total flow into Equity mutual fund schemes was discussed to be well over 30,000 crore rupees, closer to 35,000 crore rupees, with a significant amount going into thematic funds.
What is the 'iron law of fund selection' as mentioned by Kpin Parik?
-The 'iron law of fund selection' refers to the human tendency to invest in funds based on their past performance, which can lead to investing in funds that have recently delivered superior returns but may not necessarily continue to do so in the future.
What issue did investors face on June 4th when trying to 'buy the dip'?
-Some investors faced the issue of their funds being received after the cut-off time, which meant they did not get the NAV (Net Asset Value) of the day they intended to invest, but rather the NAV of the next day when the market had already recovered.
What is the role of aggregators in mutual fund investments as discussed in the script?
-Aggregators play a crucial role in facilitating the transfer of money from investors' accounts to mutual fund scheme accounts, especially for banks that do not have real-time transmission capabilities.
What are the two key factors that Kpin Parik identifies for long-term equity returns in India?
-The two key factors identified for long-term equity returns in India are the profit growth rate of corporate India, which has historically been between 13 to 15%, and the Return on Equity (RoE), which is typically between 18 to 22%.
What is the recommended approach for investors with a 5 to 7-year time horizon according to the discussion?
-For investors with a 5 to 7-year time horizon, the recommended approach is to have a hybrid portfolio that blends multiple asset classes, which can help mitigate the impact of overvaluation and provide stability in returns.
What is the current 10-year Sovereign bond rate in India as per the script?
-The current 10-year Sovereign bond rate in India is at 7%, which is considered stable with a potential downward drift.
What are the two main risks that a bond investor should be aware of?
-The two main risks that a bond investor should be aware of are interest rate risk and credit risk.
What is the difference between investing in ETFs and index mutual funds in terms of cost?
-While ETFs generally have a lower expense ratio than mutual funds, the overall cost can be higher due to additional costs such as brokerage fees and DMAT account costs for transactions.
Why might an investor choose to invest in ETFs over index mutual funds?
-An investor might choose to invest in ETFs over index mutual funds for the ability to buy or sell at a specific price during market dips, providing more control over the entry and exit points of their investments.
What is the recommended minimum holding period for midcap investments according to Amit?
-The recommended minimum holding period for midcap investments is eight years, as it allows for better returns over the long term due to the higher volatility associated with midcap stocks.
What is the potential accumulation for a 56-year-old investor starting an SIP of 10,000 rupees per month in the HDFC midcap opportunities fund with a 5-year time horizon?
-With a 14% compound annual growth rate (CAGR), the potential accumulation for this investor would be approximately 8.5 lakhs over a 5-year period.
Outlines
📈 Market Volatility and Investment Strategies
In this segment, Alex Matthew introduces the Mutual Fund Show and discusses recent market fluctuations. He is joined by Kpin Parik, CEO of DSP Mutual Fund, to explore strategies for positioning investments amidst market uncertainty. They delve into the significance of the latest SIP numbers, the impact of thematic funds, and the importance of timing investments. Parik emphasizes the 'iron law of fund selection', noting that past performance influences future investment decisions.
🤔 Investor Behavior and Market Dynamics
This paragraph delves into investor behavior, focusing on the tendency to invest based on past performance. It discusses the challenges of timing investments, especially during market dips, and the importance of having a long-term perspective. The conversation highlights the significant inflows into thematic funds and the potential risks of investing in 'hot themes' without understanding market cycles. The speakers also address the issue of investors missing out on the opportunity to buy at lower prices due to transaction cut-off times.
💼 Building and Maintaining Long-Term Portfolios
The discussion shifts to long-term investment strategies, emphasizing the role of equities in beating inflation and increasing purchasing power. Corporate India's consistent profit growth and the return on equity (RoE) are identified as key factors influencing long-term returns. The impact of valuations and the benefits of time on investment returns are explored. The conversation also touches on the role of hybrid portfolios in managing overvaluation risks and the importance of a 5 to 7-year time horizon for Indian investors.
📊 Fixed Income Investments and Bond Market Insights
This section provides insights into the fixed income side of a balanced portfolio, focusing on the current state of the bond market. The stability of the 10-year Sovereign bond yield and the factors influencing bond prices are discussed. The potential for bonds to earn between 7 to 9% over the next 2 to 3 years is highlighted, along with the importance of avoiding inferior-quality corporate bonds to manage credit risk effectively.
🕊️ Market Timing, ETFs vs. Mutual Funds, and Retirement Planning
The final paragraph addresses the challenges of market timing and the merits of ETFs versus mutual funds, especially in the context of capturing market dips. The conversation includes a discussion on the costs associated with ETFs and the potential for higher returns compared to index funds. Additionally, the segment provides guidance for a viewer looking to build a retirement fund, emphasizing the importance of a long investment horizon and the selection of appropriate funds based on risk tolerance and investment goals.
Mindmap
Keywords
💡Mutual Fund
💡Equity Markets
💡SIP (Systematic Investment Plan)
💡Gross vs. Net SIP
💡Thematic Funds
💡NAV (Net Asset Value)
💡Portfolio Diversification
💡ROE (Return on Equity)
💡Hybrid Portfolio
💡ETFs (Exchange-Traded Funds)
💡Index Funds
Highlights
The Mutual Fund Show aims to provide actionable information for investing in mutual funds.
Equity markets have experienced significant volatility, prompting discussions on investment positioning.
Kpin Parik, CEO of DSP Mutual Fund, shares insights on navigating the current market situation.
Discussing the significance of the latest data on Systematic Investment Plans (SIPs).
The disparity between gross and net SIP numbers and its implications for the industry.
The trend of thematic funds gaining popularity among mutual fund investors.
Concerns about investors buying into 'hot' themes without understanding the risk.
The importance of timing when investing in thematic funds to avoid market volatility.
Investors' experiences with mutual funds during market dips and the challenges of NAV allotment.
The role of aggregators in mutual fund investments and potential improvements in the process.
Strategies for building and maintaining a long-term portfolio in the current market climate.
The historical performance of equities as an asset class for long-term growth.
Factors influencing the returns on investments in corporate India, such as profit growth and RoE.
The impact of market valuations on long-term investment returns and strategies to mitigate risks.
Recommendations for a hybrid portfolio approach to balance different asset classes.
Analysis of the fixed income market and the potential returns on bonds in the current economic environment.
The difference between investing in mutual funds and exchange-traded funds (ETFs).
Cost considerations when choosing between ETFs and index mutual funds.
Strategies for retirement fund building and considerations for investors of different age groups.
Transcripts
[Music]
hi thanks so much for joining in you're
watching the mutual fund show and my
name is Alex Matthew like the name
suggests this show is geared towards
getting you information actionable in
information that will help you make the
right choices when you're investing in
mutual funds and we have a host of
topics that we normally discuss but
given the kind of uh exper experience
that you've probably had over the last
week week and a half or so with the kind
of chop and churn in the equity markets
I'm sure a lot of you are wondering with
the dust now showing signs of settling
how you should position yourself going
forward what are the aspects to focus on
because the political the theater over a
period of time will wind down at least a
little bit to talk about that and more
I'm joined by kpin parik who is the
managing director and chief executive
officer at DSP mutual fund
thanks is always for taking the time
always a pleasure having you on the show
uh and you know before we start with
some of these aspects with positioning
yourself and identifying how to build
and maintain your long-term portfolio
I'm actually curious about some what you
think about some of the latest data that
has come through from ay and um just
interesting about that uh sip number
first of all which is close to 20,900 00
CR since July of last year we've been
seeing all-time highs every month but
we've also come to know about the net
number which is much lower of course
than the gross number uh and so is it um
do you take this data uh as a
representative of the industry with a
pinch of
salt uh thanks for inviting me uh again
uh to your show Alex and uh like like
you mentioned lot has happened in the
last 3 weeks or so uh actually I've been
immune to that because I was on two
holidays I've just lucky you Calin I I I
left uh when Nifty was at a level and
it's back to the same number so actually
nothing has happened for me and that is
how investing should be coming to the
numbers you know this data has been
there forever you know for many years
now um there is a ratio of around 40 to
50% in terms of the gross to net so
uh the 15 to 20,000 CR gross number that
we see every month is the new sips that
are coming in from a different set of
new investors who are joining the
industry and um finally when you see the
net number in you know closer to 8 or
9,000 crores there are some old sips
which are completing their tenor there
are certain sips where the investor may
have a cash flow need and he's stopping
his sips so this has been a common trend
for a long period of time and there's
nothing unusual that I would read into
it it is business as usual there is
always this leakage I won't use the word
leakage it's actually closure or end of
sip so let's say if in 2015 I had done a
8e sip that 8e sip is getting over and
that's why it's not getting reflected in
the next round so nothing to really read
too much into it according to me I'm I'm
glad that you pointed that out but and
before we get into again the portfolio
side one or two other aspects uh struck
me in today's data which is the kind of
flows overall into Equity mutual fund
schemes and I'm talking about the
actively managed schemes well over
30,000 CR rupees in fact closer to that
35,000 CR rupees but a large amount
going cpan into thematic funds we're
talking about one nfo of course but uh
that accounted for about 9,500 CR rupees
out of 19,000 CR rupes which is very
substantial what does that tell you
about the U the objetive
or the expectation of the mutual fund
investor so uh see Seb has created
various buckets large cap midcap small
cap and anything which does not come
into this bucket or which is a very you
know narrow idea or theme comes in in
the Thematic bucket and in the last year
also in fact it's not just this month
Alex in fact when I was presenting to my
board few weeks back even the year-to
DAT number the largest FL flows have
gone into either thematic or small and
midcap as a category and some of the
themes which have been at play for the
last two or three years have delivered
Superior returns so uh in fact except
Banking and um consumer and Tech all
other thematic uh strategies or funds
have delivered significantly higher
returns than Nifty and you know almost
to the tune of 20 to 25% cagr in the
last 3 to 5 years now what does this
indicate this indicates um the iron law
of fund selection that human beings you
know bring to the four always which is
most of us invest for the future looking
at the past so in the last few years
thematic funds have delivered Superior
returns and in current times thematic
fund nfos are also garnering a large
amount of assets um that collectively is
reflecting in this larger chunk of
thematic flows um now part of it if if
done thoughtfully by knowing what theme
you are buying with what type of risk
profile is absolutely fine but I do
worry at times if investors are buying
into hot themes at the peak of it cycle
without knowing that these themes have
you know sharp cycles and they can go
through extreme amounts of volatility so
mostly if you talk to anyone of us in
our industry we always recommend
Diversified funds FX cap funds multicap
funds thematic funds need to be timed
well and the best time to invest in a
theme is when it does not feel like the
best time to invest which is the last
three year return I'm not looking that
great well put uh you know I'm just
going to take a chance and get your
opinion on this because I think a lot of
investors cpain are upset about this and
they tried to buy the dip you know it's
it's said very uh you know
vociferously every time we speak on
television buy the dip buy the dip and
when they tried to do that on the 4th of
June uh some of them that tried to
invest got the nav of the next day not
through no fault of theirs and I'm
guessing through no fault of the mutual
fund industry either because they
received the funds after the cut off
time but U is there something that you
think can be solved I I I know that you
may not have a solution for this but I'm
still curious of your
opinion uh see I think U and I don't
have really a full color to this in
terms of you know uh what amounts of
flows did not get participation on that
day but there are two things to keep in
mind um you know there is a need for
agregator so the ideal condition is that
I have money I bought on that day for
example I was in Goa on a holiday
markets were down 5 7% I went to my
mobile app of DSP and I chose three
funds and uh I transferred money in one
minute all the three funds you know the
money was transferred and I got the end
of the day so so there is one way of
investing which uh you know you you go
on the platforms directly and get it now
there is another way where you have to
go through aggregators and there is a
huge role that aggregators P because not
all banks uh you know have API linked in
such a way where money can you know
transfer real time so there are many
banks around the country some uh you
know private sector Banks public sector
Banks Cooperative Banks now all banks do
not have full uh transmission real time
so in fact even I asked my team to see
what can we do so that you know in
future this does not happen and U it was
a 4% fall what tomorrow it could have
been a 10% drop and 10% rise the St that
would have meant a significantly large
loss to investors for no fault of their
so we'll have to investigate figure out
where in the process is this leakage
happening where is the money getting
delayed from uh you know transferring
from investors's account into the
aggregator and through the aggregator to
the mutual fund scheme account and see
how we can solve for that point yeah I'm
guessing everybody's trying to find a
resolution and in fact I guess at some
point the regulator might also have to
step in to identify what needs to be
fixed but let's go to the topic that I
promised and thank you so much Calpine
you're such a sport you've taken
questions on topics everything apart
from what we had agreed to speak about
but let's talk about building an a
portfolio or maintaining a portfolio
because after such um important events
like we've just witnessed over the
course of the last couple of weeks it
also pays to take stock and to
reposition if so so if you're looking at
the next 5 years pain what do you need
to bear in
mind I think U from a from from a
long-term investors perspective what we
have to bear in mind is that U we are
here to invest so that we can beat
inflation and increase our purchasing
power and um the best asset class which
has done that so far in history has been
equities uh and equities again do not
always make money we we recently
released a report uh through NRA I think
a month back which highlighted that in
many countries 10 year 20 year 30e
returns also has been negative for
Equity as an asset loss or returns have
been lower than fixed income or returns
of that stock market have been lower
than gold in their local currency terms
because currencies also tend to you know
go through phases of decline in case of
Indian investors we have been very
fortunate that um two things that matter
for the health of our money um you know
corporate India continues to grow
profits uh uh in a return in in a ratio
of 10 to 20% so in in bad times we've
seen our economy when it whenever it has
slowed down profits have grown at 10 to
12% and in good times they have grown at
18 to 20% so on an average over the last
25 30 years we have seen 13 to 15% sort
of profit growth rate for um corporate
India so if we are shareholders of this
profit growth rate more or less that
transfers into our long-term return now
this number can get either diluted or
enhanced depending on what price we pay
for this 13 to 15% profit growth rate
over a long period of time so one is the
profit growth rate and the second thing
is the Roe of corporate India so if
there are 500 companies in Nifty Nifty
500 and most of us as mutual funds
invest in 250 of these 500 companies the
Roes of most funds again are between 18
to 22% so uh around 14% growth profit
growth around 18% Roe this is what you
are buying as an investor um the only
variable that changes you know the
outcome from a return point of view is
what price we are paying the price that
we are paying to buy this profit pool
and this Roe today is around 21 22 times
uh it is slightly expensive than what it
should ideally be at now what is ideal
according to you and me may not be what
the market wants so the market can
remain less ideal at different points in
time so right now the only thing that
you know can reduce your returns from
this growth rates is the higher
valuation but if you have a 5 to seven
year time Horizon time takes care of
most of these challenges overvaluation
can be solved for by two things one by
introducing two three other asset
classes which you know in a way reduce
the impact of overvaluation so if you
add some Bonds in the portfolio if you
add some Global stocks in the portfolio
if you add gold in the portfolio it
somewhere will solve for overvaluation
on on on one side and the other other
part of overvaluation can be solved by
time Horizon so what return you would
have earned let's say in in 5 years you
may end up earning in six years so your
returns could get marginally moderated
but I don't think Indian investors need
to worry if they have a 5 to seven year
time Horizon because we have two things
going right for us our growth rates are
reasonably stable and durable compared
to many parts of the world and our
macroeconomic stability has never been
as good as we have seen uh in the last
decade so our currency is stable our
deficits are stable our inflation is
stable uh policym has been reasonably
disciplined all through uh periods of
shocks in the last 5 seven years whether
you know the shocks of demonetization
the shocks of covid we our policym has
never been at extremes compared to rest
of the world so these few Dimensions you
know tell us that our returns could get
moderated but we don't have to worry too
much in terms of significant volatility
we could have marginal volatility at the
margin and which is why we recommend
hybrid portfolio portfolios which blend
multiple asset classes at this point
only to solve for the slightly higher
valuation which exist at this point in
time come to that exactly in fact if I
remember correctly uh either at the
start of the year or towards the end of
last year we had spoken about something
similar and You' said that hybrid is a
good way to go because of the blending
of these aspects and that seemingly
continues to be the case but if you are
to do it yourself cpan and if you are to
have a blend of equity and and bonds
then what should you bear in mind on the
fixed income side on the bond Side based
on everything that you're seeing all the
moving
Parts see again in fixed income today
the The 10e Sovereign bond which is the
best quality bond in the country uh is
at 7% uh normally it fluctuates in a
range of you know 6% to 8% these are the
broad boundary conditions we are
somewhere in the middle uh now from
Seven it can go higher from Seven it can
go lower the odds are it it will remain
stable with a downward drift because um
normally Bond markets look for
parameters like stable inflation stable
currency and the demand Supply uh of
bonds so every year the government needs
to borrow more more between 10 to 12
lakh crores via auctions now um in the
next two to three years there is enough
demand from domestic investors as well
as Global Investors for uh India bonds
and that demand is likely to not just
match but um you know be
higher than the supply that is likely to
come from more insurances either by
government of India or by corporate
India so interest rates are likely to
remain at at stable rates at 7% with a
bias for them to be lower one or two
years from now now if rates fall the
investor not only earns the 7% but can
earn between 1 to 2% more in terms of
Mark to Market so there are reasonable
chances or probabilities that the
investor could earn more than the
current carry if rates were to rise he
would earn 7% % minus Mark to Market if
rates were to fall the investor would
earn 7% plus some Mark to Market and at
this juncture where we are poised right
now where our currencies are you know
our currency is fairly stable our
inflation is reasonably stable deficits
are reasonably under control as long as
Government behaves well in terms of
fiscal policy and the RBI you know has
the pragmatic monetary policy that it
has played out in the last four five
years I think our interstates are
unlikely to see any negative upward bias
and hence bonds can earn between 7 to 9%
return in the course of next 2 to 3
years with reasonable amount of
stability so I think a bond investor
just needs to keep in mind that he's not
buying uh credits without understanding
or going Below in terms of inferior
quality of corporate bonds because there
are only two things to to keep in mind
interest rate risk and credit risk
interest rate risk reasonably stable
right now because of the setup we are
credit RIS the investor has to ensure
that you don't make the mistake that we
all made in the last cycle where we gave
money to so-called people in names even
you know without really looking at cash
flows and balance sheet and governance
and those parameters but I think if
investor were to just buy the Sovereign
Bond or even a guilt or if not do on his
own but give it to a hybrid fund where
the fund manager will help you blend
these two asset classes and uh P you
over the next five years fantastic cin
always a pleasure speaking with you and
I look for forward already to the next
chat thank you so much for taking the
time good thanks Alex Amit kukreja the
founder of am Amit cra.com is joining us
on the program right now Amit thanks as
always for taking the time and uh
specifically speaking about that June 4
issue that so many people have spoken
about did you have people that you
interacted with that pointed out the
same
issue no so the issue was not pointed
out Alex but a couple of clients did
reach out saying they wanted to invest
money today as when the counting was
happening and the market had already
fallen decent 6 7% that day and we did
submit the purchase orders and you see
in mutual funds you get the end of the
day nav and thankfully market closed
about 5% or 6% lesser than what it
started with so the dip was able to be
capitalized in some of the client
portfolios but if the market had risen
back by the by the time the you know the
closing Bells have rung then the dip
would not have been capitalized in the
mutual fund Investments portfolio um and
we checked the nvs were assigned as of
fourth of June so no issues on that
front but I heard there were issues uh
reported by several other advisers where
some of the mutual funds were not
allotted the NOS of end of that
particular day but but were aligned but
were allotted the NS of the subsequent
day when the market had already come
back up by 3 to 4% so just so that we're
all on the same page and my invest my my
viewers know what what we're talking
about what are the thresholds and what
are the cut off times that we should
focus on
Amit I think for equ mutual funds uh
definitely before 2:00 we should go for
I think the cut off is 2:30 or 3 uh but
we normally go for 2:00 because at times
we have seen there are lot of
intermediary connectedness issues with
with respect to infrastructure
availability sometimes the transactions
do not go through for debt funds we we
keep one 1:30 p.m. internally at a firm
level as a c of time but I know the time
communicated to us is 3:00 p.m. um for
um for equity and debt but we keep it
before 2:00 so you know I was actually
thinking about this and not to belittle
the issues that have been pointed out
but in the largest scheme of things Amit
my question to you is if somebody is
missed the opportunity of investing at
the low point of the 4th of June unless
it's a very large amount of money that
is being invested have you lost anything
dramatically if you're talking about the
longer time
frame no you haven't see if you're
looking at the trend of a over a period
of 10 years or eight years these are
little glitches that you will easily be
able to you know capitalize much later
depending upon your holding period
because if you're missing out the dips
I'm sure you will miss out Miss out the
um wrong Windows to sell also so you you
cannot calculate all these opportunities
and put a mathematical value against
them but you can just keep a trend in
mind that if I'm in a good macro
situation where the economy is expected
to do well next 10 years these dips will
keep coming but we will have a
continuous systematic purchase plan
either through sip or through STP in
mutual funds and we will write the wave
of volatility and do and do the cost
averaging on the basis of that rather
than by timing the market nobody can
time the market
perfectly uh I do want to talk about uh
buying at a specific price point though
because in the passive segment at least
Amit we're talking about index funds
versus ETFs and the advantage of ETFs of
course is that it offers you the
opportunity to buy or sell at a specific
price so if you have an event like the
4th of June and if you absolutely need
to get a specific price is it a better
Avenue to look at e
FS see if you if you're trying to take
advantage of the market dips during the
day then ETFs definitely give you that
advantage over mutual funds because in
mutual funds you get the end of day
nav however in ETF also you can't just
buy you can you will have to put a limit
order right at at this price or lesser
you'll be able to buy otherwise you'll
miss the order so you based on the limit
order or you do a market order
transaction like what you do for stocks
exactly same approach is required for
ETF it's very tricky um you know the
ETFs can marginally give you better
returns than index funds but in the long
run the difference averages out to very
very minimum number
so stocks and timing the
stock or trying to find a stock or buy a
stock at a dip might be a better or
rewarding experience then trying to do
that with ETF because ETF at the end of
the day is a collection of stocks which
is an index which is a very passive
strategy of building your Investment
Portfolio that's a fair point uh we did
incidentally have a question from Deo
prio uh s sadhu who's aged 58 and he's
asking what the difference between a
mutual fund and an exchange Trad fund is
and you've broadly answered the question
but in your uh study of it are the costs
lower for exchange rated funds
so ETF definitely comes out to be lesser
expense ratio than mutual funds but if
I'm having a strategy to buy ETF then I
will also look at my dmat account cost
The Brokerage that I'm incurring for
doing the transactions and in some cases
it turns out to be an overall more
expensive Affair than the index mutual
funds where everything is taken up um
where everything is looked after by the
fund house by the asset management
company that is managing that ETF so it
depends depends upon what ETF you are
choosing compared to the index fund of
that index for which you have chosen the
ETF broadly it comes out to be the same
and in some cases ETF turns out to be an
expensive Affair if you look at all the
overall cost of demat and transaction
but if you looking at only passive
investing through mutual funds your
mutual funds will come out to be cheaper
uh if you compare the overall cost of
ETF and managing an ETF based portfolio
we have time to take one more query and
that's coming in from paraa Mitra who
says he's 56 years old and he's looking
to build a retirement fund I do not know
what his of overall Corpus looks like
Amit but he's thinking of starting an
sip of 10,000 rupees in the HDFC midcap
opportunities fund he's got a Time
Horizon of 5 years and he's aiming for
an overall Corpus of 1 CR rupees what
should he bear in
mind so PARTA as I see his age is 56 I
don't know what is partha's experience
in mutual fund Investments is if he is a
seasoned investor he can definitely
start investing in a midcap fund HDFC
midcap opportunities is a good fund but
remember for a midcap investment you
have to have a minimum holding Horizon
of eight years the longer the better
because your returns are going to be
much and so for for five years um if
he's investing about 10,000 a month at
14% cagr he's likely to accumulate 8.5
lakhs approximately
Fair Point all right U I hope that
answers paa's question Amit thanks so
much for joining in and for speaking to
us about ETFs versus index funds and how
to buy the dip and also for answering
the questions that came through uh
viewers that brings us to the end of
this particular edition of the mutual
fund show thanks so much for tuning in
there's lots to talk about over the
course of the day you'll find all of
that right here on NTV profit
[Music]
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