August 24, 2012 9:15 am
What should be learn/infer from this article, or is it too early to comment on the changes now.
PPFAS cleared all the doubts :):)
Read: The reluctant analysts: From the WMG Desk
Dear Jassi, thanks for sharing the link.
Dear Jassi, to me, this article is published for the sake of discussion only. Real thing in terms of performance is projecting a totally different story. When we compare the performance of ULIP funds with MFs, all top class MFs are clear winners with a wide margin. Even though the charges are lower in ULIP funds.
Also I’m more comfortable to have control in my hand to change the non performers from MFs which is not possible in case ULIP funds.
Interestingly, If we assume that all the info provided or the assumptions as made in the article are going to be true, it’s exactly opposite of what AMCs were hoping (to garner higher market share against ULIPs).
Dear Jassi, please read the below link to get another view for this increased expense story.
Point 2> I didnt know about front-loading of ULIPS. (In fact I am not much aware of ULIPs). Thats not mentioned in the article now. So obviously, if there is Fron-loading, ULIPS will remain expensive.
Point 5> By distributors, you mean platforms like FundsIndia also (where its currently free) ?
Is this change for existing funds too?.
The article seems to suggest that Direct funds will be different, with different NAVs. Still, let things be a lot more clearer. These are early days, and definitely not worth losing your sleep.
Do not wait for these things to actually come, and then start your investing (if not done).
Or continue with the present things, as they are.
Good that you are not aware of Ulips, in the sense that complex products are usually not worthwhile. Keep it simple.
Sure the new hike in Expense ratio is a dampner in Mutual Fund Charges.
But still i dont have any other good product which will give me inflation adjusted returns and beat sensex by a margin.
Only alternative i see is index fund or ETFs
He already shared a link. just check it that
I know, but pasting a link without understanding things is not helpful.
I wanted him/her to read, understand and post a summary. Do not just go by headlines. The body sometimes says quite an opposite thing.
I get your point Ramesh. Spoon-feeding doesnt help 🙂
Heres what I understand from this article:
1> Expense ratio of MF have increased. To how much, it depends. But the maximum it can be to about 3.12% now, from 2.5% currently.
This is for schemes with assets less than Rs 100 crore.
2> ULIPS: As per IRDA regulations, insurance companies can charge a maximum of 3% for a 10-year Ulip and 2.5% for a 15-year Ulip in terms of overall charges. Is this true?
3> Long-term investors may move to Ulips once they start comparing the costs involved. From a distributor’s point of view, distributors will push Ulips as they get upfront commission selling insurance products,
4> Other stuff is about Distributors and their intentions to maybe sell more ULIPs.
5> One more interesting aspect: Direct plans allow customers to invest in funds directly — without incurring any incidental costs and at lower expense ratios. These funds may be cheaper than regular funds by 50-75 basis points and it will bear a separate NAV from regular plans.
Does this mean directly buying from the fundhouse will be a tad cheaper?
1. So, for small schemes, the expense ratio has increased. Which just means, you should not invest in them. You should invest in schemes which have proven to be good over a long term, and which have decent corpuses.
2. Yes, that is true. Compare it with now no-load scenario of MFs (vs front-loading in Ulips). Even with same charges, because of the front-loading itself, Ulips will be costlier.
3, 4. The whole idea of the article seems to be that now distributors can push towards Ulips, saying that MF have become costlier because of new SEBI norms, while IRDA has been pushing towards lower costs. Unless you read the fine print, you will not be able to say that, and you may follow the distributor blindly.
5. Very interesting point. If direct investing funds are available, then the cost of management will become lower for direct investors. This actually means, the MF route will become even more cheaper for those who will do direct investing. Bad for distributors again. This is exactly opposite to the headline of the article. 😉
Yep, quite cheaper.
Have you read it?
Post a summary here then.
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