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ETF | Portfolio Yoga

Chart: Savings in Expense Ratio

Everything Is Relative said Albert Einstein. In stock markets, this is done by way of Bench marking our performance against another Portfolio. In the United States, ETF assets have grown at a compounded rate of 25% in the past decade as investors have shifted big time from Active Funds to Passive driven by consistent under performance by Active funds against the Benchmark Indices.

While the flow into ETF’s in the US is into the Top 500 stocks, in India much of the flows is into the Top 50 stocks. Having said that, the interesting data point to not here is that the returns of Nifty 500 since its Inception actually matches that of Nifty 50.

Performance of Nifty 50 vs Nifty 500 since Inception of Nifty 500

The biggest advantage of Passive is the savings on Fees which over time can be a huge. If you were to start your investment journey and save say a Lakh of Rupees for Retirement per year and add another Lakh per year which goes up by 6% every year, this is the difference between paying 0.10% or 1.25%  which is the approximate average of Direct Mutual Fund Fees versus Regular Mutual Fund Expense Ratio which is around 2.25% over a period of 30 years.

Comparing the Life time Expense (based on current expense ratios)

The differential itself is pretty incredible. Where is paying 3.60 Lakhs versus paying 45 Lakhs or 81 Lakhs. If you are investing in Large Cap funds, it makes very little sense to invest into any Mutual Fund and yet the truth is that 20% of Equity Mutual Funds are Large Cap oriented.

While on Twitter we find a lot of ETF warriors, the issue lies with the fact that financial products are more of a Push Product than Pull. This means that some-one has to paid to sell mutual funds or ETF’s or Insurance or for that matter any other product that asks for your savings.

ETF’s despite their growing popularity are an abandoned child. The biggest advantage of Mutual Funds lie in not just their commission model that allows others to benefit from the sales but also the fact that there is a fund manager who you can point fingers to in case of under-performance.

In case of the ETF, there is none other than maybe a couple of Fee only Advisors.

With RIA’s rules getting changed in favor of the big boys, I doubt this shall change. The benefits will be limited to the few while the majority will continue to pay a higher fee for a inferior product that serves them better neither on Return or on Risk.

Active vs Passive debate rolls on

Aarti Krishnan of Prime Investor posted today an article titled “What are the Risks in Index Funds”. 

Basically she boils it down to 

  1. They do not protect you from market volatility
  2. They may have concentrated portfolios
  3. They don’t shield you from business or governance risks
  4. They do not guarantee superior returns

I believe that the above reasons aren’t in themselves reasons that make Index funds Risky in any way compared to the alternatives (Active Mutual Funds). My views on the points raised and my thoughts on what is the better approach.

They do not protect you from market volatility

While there are various ways to measure volatility, for me the choice is to look at maximum draw-down. Draw-down is the percentage change the instrument has suffered from the time it hit its peak. 

For example, Nifty 50 hit a high of 6357 in January 2008. By March of next year, it was down to 2600 levels. In other words the Index had declined by nearly 60%. If you had invested in a passive fund or ETF, this is the draw-down you would have seen since the fund mimics the Index, nothing more nothing less.

On the other hand, Active Mutual funds have a fund manager to look after the portfolio and hence your interests. It’s the very reason you pay 2.5% yearly. They wouldn’t have done so badly, right?

Here is the chart depicting the draw-down faced by various mutual funds. Do note that some of these funds weren’t large cap at that time.

Large Cap Mutual Fund draw-down from Peak

As you can see, Mutual Fund’s did not shine themselves too well. But that is excusable as long as they deliver alpha – or gain more than the Index gains itself you may say which is true. As long as a fund manager delivers a higher return than the Index after fees, his fee is none of the concern unless you believe that you can do better than him.

The following table from S&P shows 6 out of 10 funds have failed to beat the Index. This presents an issue – Can you select the better fund 10 years ahead of time. In the last three years, just one or two funds out of 10 have outperformed. 

Maybe this can reverse, Maybe it won’t. But purely based on Data, Active funds carry the same risks as passive while not really delivering big, at least when it comes to Large Cap Funds.

They may have concentrated portfolios

Since Indices are free float market weighted, sectors that are the current favorite have a higher degree of concentration than the one’s that have fallen out of favor. With the current favorite being financials, it no wonder that it dominates the Index. But this has always been the case. If you remember in 2007, Index weight was dominated by Infrastructure & Ambani companies. 

Concentrated Portfolio in itself isn’t wrong. The key is to have conviction in the stock and bet on the same. A diversified portfolio is good when conviction in the stocks is low and one reason my own Momentum Portfolio has a 30 stock portfolio.

If you look at the portfolio’s of most funds and compare them to the benchmark index, you can see very little differentiation out there. Its as if they are closet index funds with a pinch of active.

They don’t shield you from business or governance risks

Indices that are fundamental agnostic do once in a way add a stock that carries significant risks. But that risk is carried by even active funds. When Manpasand fells on questions of Corporate Governance, more than a few funds were found to be holding the same. Everyone makes mistakes, Active or not, you cannot avoid such risks completely.

They do not guarantee superior returns

I think this point was the focus of the article going the replies in response to a tweet. Index funds actually underperform the Index to the extent of their fees and slippages. But with fees for ETF’s (different from Index funds) as low as 0.07%, one wonders should one be concerned.

Does all the above info mean that it makes no sense to go active and instead one should buy the cheapest ETF or Index traded fund? 

I disagree. Mutual Funds have their use case, but it’s more of an active strategy than a passive one of just Buy and Hold for a lifetime. If your use case if Buy and Forget, I think there is more benefit buying a Multi Cap fund than buying an Index which buys the top 100 stocks of today.

When we invest in funds, we are betting on the fund philosophy / fund manager. That being the case, why should you limit him to buying only from the top 100 stocks or stocks ranked from 100 to 250 for instance.

Multicap funds allow the fund manager to take a call on where he feels value is there in the current market scenario and bet on those segment regardless whether its from the large cap or small cap.

Another style of funds that is worth being in active vs passive is from the Small Cap and Thematic funds. But here too some amount of timing is required unless you can stomach draw-downs of 70%+ that few funds saw in 2008 / 09 for instance and one that took years to reclaim.

The biggest risk of Index investing is that Indices can go flat for a long time. India has limited data. I hence calculated the % of time, your investment could have yielded negative returns even post holding for 10 years. For the S&P 500 where data goes back to 1950, that comes to 8% of the time. Not high, but something that you should bear in mind.

The best use case for ETF’s that track Indices is to have a tactical allocation strategy. Be long when the trend is in favor of you and be out when its not. Right now the trend in large cap is hot and strong and a good time to be invested. But there will come a time when its out of favor and it makes no sense to go through the pain. 

The role of Incentives and what it means for your Retirement

There is this famous skin Doctor in Bangalore whose clinic is thronged by patients all-round the year. Being famous generally also means that one gets expensive but it ain’t so here, the Doctor Consultation fees is lower than what any other specialist anywhere shall charge.

But there is a catch – you need to buy the ointment he prescribes at the Chemist shop next door. The chemist dispenses the prescription which can be split into two parts. One is the actual ointment, an as I have experienced, this is not one easily available elsewhere. Second is a cold cream which is manufactured by a very famous multi-level marketing company.

You buy both and go back to clinic where the Doctor’s assistant mixes the same, labels it and then goes onto provide you with the next appointment date. While the Doctor fees is generally small, the charge for the ointment is extravagant – especially the cold cream.

You by now would have clearly guessed how the Doctor can afford the small fee and yet earn big. Is this Illegal? Of course, not. He doesn’t really compel you to buy at the chemist next door but I have tried and failed at sourcing the ointment elsewhere, so where else would you really go.

Second, once you accept this as part of the fees, you are okay for your main criteria here is not about paying money but getting rid of the disease that afflicts you.

Is this ethically or morally wrong?

What about if the Doctor charged a much bigger amount as his fee but then recommending medicine that is more affordable and not limited to that one store. Would that change the dynamics for his patients?

Or, what if he charges a low fee but prescribes high cost medicine and gets compensated not by the Chemist but by the Pharmaceutical company by way of tickets to seminars in distant countries or just a direct cut from the sales of the said medicine. Would that make any difference?

Let’s move the discussion to the world of Finance

Stock Brokers for long have chased their clients in an attempt to get them to trade more – higher the trading, more the brokerage. This is of course not in the best interest of the client, but targets have to be met, incentives have to be lapped up – so who is really counting.

While brokerage rates have fallen, even today many a stock broker dealer (the guy who places the order on your behalf) is determined not by how faultlessly he handles the transactions but how much brokerage he can generate.

Don’t we all have an Aunty or Uncle who after becoming a LIC agent would pressurize one to buy a policy which while actually not serving our real needs would help the Aunty or Uncle meet his targets and collect his cut of the cake.

Introduction of Unit Linked Policies took this to an extreme and while the trend has reduced a bit thanks to curbing of how much the agency can pay as commission, the highest and the worst form of financial misspelling still lies in the Insurance Field.

In an attempt to incentivize its distributors to sell its funds, Mutual Funds offer two kinds of payments – Upfront Commission and Trailing Commission

Upfront Comission is paid for any funds received – be they lumpsum or SIP. They range from 1.5% at the higher end to 0.25% at lower end with the Median upfront commission being 0.65%.

Trailing Commission is the commission paid on the value of your investment. This is to incentivize the seller for helping the client stay with the fund. It’s also a kind of ransom paid to ensure that the seller doesn’t take his clients money out at the end of the first year to only re-invest & hence obtain the upfront commission.  This commission ranges from 0.75% to 0.25% with the median working out to around 0.50%.

Debt funds, a category of funds that invest only in Debt products with return comparable to Bonds on the other hand has way lower incentives. The incentives themselves depend on the product with Liquid funds which are favoured by corporates getting the least amount while Gilt and other longer duration products commanding a higher fee in recognition of the skills it takes to sell those.

“Show me the incentive and I will show you the outcome.” – Charlie Munger

Incentives aren’t just limited to the ones above. After all, when people complain that Tata Workshops don’t distinguish between the Taxi driver who is driving a Tata Indica and the owner of Tata Safari, Star Distributors cannot be satisfied with financial incentives alone.

A large mutual fund house for example takes its Star Distributors to Omaha to attend the annual pilgrimage that is the Berkshire Hathway Annual General Meeting. While the meeting itself is in recent years broadcasted live, there is a world of difference in attending it live versus attending it from the comfort of your room. Attending at the comfort of your own doesn’t give you the bragging rights compared to what you get when you attend it live.

It’s ironical that they are sent on a trip to Omaha given Warren Buffett’s own views when it comes to Investing. Speaking to CNBC, he said

“Consistently buy an S&P 500 low-cost index fund. I think it’s the thing that makes the most sense practically all of the time.”

How many advisors, whether they visit Omaha or not will dish out this advise to their clients? While its true that in the recent past, active funds have beaten the passive indices, with new changes, do you really think that they will continue to beat forever.

SBI ETF Nifty 50 is the largest fund out there thanks to it being the fund of choice for the Employees Provident Fund Organisation (EPFO). It is also the cheapest fund around and the one with the lowest tracking error.

Over a 3 year look-back, this fund is the 12th best fund of 68 funds. Most of the 10 above this, the 11th fund is its cousin – SBI ETF Sensex, we have only Axis Bluechip fund with almost all others ebing passive ETF’s.

Going further, I believe this trend will accelerate with more and more ETF’s and Index funds being in the top decile.

But ETF’s and Index funds have a problem – they are no one’s baby. So, regardless of the returns, barely any advisor will recommend the same to his clients. Over a 10 year period, the best performing large cap fund is Reliance ETF Junior Bees. Its AUM – a measly 515 Crores.

In the United States, this problem has been taken care of my Fee based financial advisors and wealth management firms who have succeeded in breaking the taboo of investing in simple and plain products. In India, you have better luck finding a needle in the haystack than finding a financial advisor who is fee based.

Fiduciary Duty: A legal obligation of one party to act in the best interest of another.

Fiduciary duty of an Investment adviser is similar in thought to the Hippocratic oath that requires a physician to uphold ethical standards. Keeping the objective of the client above oneself is the key trait of the Fiduciary duty.

Time and again, data has shown that Investors exit and enter markets at the worst possible moments. While one cannot time entry to perfection, when one exits in a panic, the reason is not just about loss of money but loss of confidence.

Mutual funds today are being pushed as the answer to all ills with all kinds of numbers floating around on what to expect. Rather than temper expectations which also leads to a better informed client, very long term historical numbers are used to suggest that one can expect to become rich by investing a very small sum today.

The primary reason for disappointment comes from unable to reach or beat estimations that one figured would be reached. When a product is sold with expectations of high returns, any deviation will result in the product being blamed rather than the message.

Recently I saw an advertisement from a fund distributor that saving just Rs.3000 per month could make one a Crorepati in 30 years assuming growth of 12% per year. There is nothing wrong perse with the above statement.

But what is missing and critical is the value of that 1 Crore, 30 years later. Can you buy what is worth 1 Crore today for the same price 30 years later?

In the US, over a 20 year period (1996 – 2016), tution cost went up by 200% even as general inflation itself went up by 55%. Quality education in India is becoming expensive by the day and given our inability to finance, we are ending up with students passing out of colleges without much of the knowledge and experience required by the Industry.

Tution cost for a two year post graduate degree from the Indian Institute of Management currently stands at 22 Lakhs. Add to this cost of living, cost of books, transport among others and we are quickly looking at somewhere in the 30 Lakh benchmark. Even assuming it grows at 6% per year, 30 years later, you shall be looking at something in the range of 1.75 Crores.

In the above advertisement, 12% return is the post expense return. What this actually means is that a regular fund has to generate 14.5% returns to get you 12% returns. Direct fund requires generating 13.5% returns while the ETF needs to generate just 12.10% returns to meet your 12% requirement.

What if instead, we assume that all funds can generate just 12% returns before expense. Assuming you were saving 3000 per month, what would you end up in the 3 different examples?

Even though the savings and the market returns were the same, the difference in returns is staggering. This is the act of “Compounding”. Returns and Fees both compound – one adds a positive flavour to your returns, another negative.

I am a strong believer in Active Investing and while Active Mutual Funds have had an exciting time, the days of strong out-performance vs the benchmark is more or less gone. The culprit may not be the rules as much as their own growth in assets which limits flexibility on what you can buy.

But that doesn’t stop funds from accumulating more and more for higher the AUM, higher the Income for everyone who is in the food chain.

Well, I think I’ve been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it. And never a year passes but I get some surprise that pushes my limit a little farther – Charlie Munger

At the Intelligent Fanatics website, a case study was recently posted on the site with a lot of real life examples of how human behaviour was moulded by the wrong kind of incentives. From selling more loans to get meet the incentive plan (sell less than 80% of goal & you had no incentives awarded) to classifying orphan children as mentally disabled since the subsidy by the government was $1.25 per day for an orphan versus $2.75 per day for psychiatric patients.

If my reward to sell a particular fund was a free trip to Omaha, would I really be concerned about whether the fund suited the client or not?

If you are saving for retirement which is 20 / 30 years away, the savings from fee alone can make a huge difference. Remember, at 6% inflation, a Crore wouldn’t go a long way 30 years from now – you will need at least 30 Crores to make the nest count.

Market performance is not something you can control, on the other hand the cost you pay to achieve market returns is very much in your control. The question is, Will you Act?

 

Fee always makes a difference to the outcome. Stop following the Herd

Till the establishment of the National Stock Exchange, anyone who wanted to buy shares approached brokers of the Regional Stock Exchanges who either bought the shares on their own exchange if it was traded or bought it on another exchange on which the stock got traded.

There were two kinds of fees that brokers levied. One was the brokerage which was anywhere between 3 to 5 percent of the transaction amount depending upon whether the stock was traded at the exchange where the broker was a member or on another exchange.

Of course, this was the known fees that were paid by the client. The unknown fees were that of the difference in price between where the share was originally bought or sold and the price reported to the client.

It was not a surprise that Regional exchange membership commanded mind-boggling prices. Most exchanges gave out a limited number of membership cards. The scarcity of the membership card combined with the opportunity to make a bundle meant that come rain or shine, prices of the membership card barely went down.

To compensate for the high fees, each member was allowed to bring in a few more authorized assistants into the trading ring. Even at exchanges where volumes weren’t really great, the price for becoming an authorized assistant wasn’t cheap.

Time and Tide wait for none and so it has been for the stock brokers. First came SEBI which restricted maximum charge that a broker could levy at 2.5%. Establishment of the National Stock Exchange was the real deal breaker when it came to membership prices. Operating on basis of Deposits only, NSE literally pulled the rug from under the feet of other stock exchanges.

Brokerage rates have been on a downward trend since then though establishment of Zerodha in 2010 with its per trade brokerage at first and later going in for free brokerage for delivery trades. Incidentally, the US seems to be catching the same bug with JP Morgan following the lead of Robinhood in offering free brokerage.

The key reason for falling brokerage was not because of the SEBI law which still held brokers could charge 2.5% but because National Stock Exchange removed once and for all the arbitrage held by brokers. Since becoming a broker was now easy and much of the deposit was refundable. Demand and Supply leveled the playing field once and for all.

Few days back, all hell broke through when Morning Star released its Morning Star Global Fund Investor Experience Report 2017.

India has a very good score in many aspects. 100% of mutual funds in India revealed their portfolio’s on a monthly basis, something that no other country in the list comes close. Indian Mutual funds also have the lowest time lag from end of month to release of portfolio holding details at 11 days. The worst is Hong Kong at 113 days.

The key reason for the anger lay in the section of Fee and Expenses. India saw a drop from its previous standing to now be part of the Below Average category. While Fees are indeed higher compared to other countries, Front Load not being present should have added value for they too are a part of the Expense Ratio, at least for the First year of investment.

Its thanks to SEBI in large part that today we are able to enjoy a low brokerage structure that is absent in most other countries. But it’s the same SEBI that seems to be the hurdle when it comes to opening up of the financial sector for competition.

While RBI restricts Banking Licenses making it nearly impossible to compete with existing banks, SEBI by way of minimum capital requirement has made it tough for competition to emerge.

In 2014, SEBI raised the Networth required to become a Mutual Fund from 10 Crores to 50 Crores. In one step, SEBI killed the competition that could have come up with interesting and new products. Over the last few years, we have actually seen a decline in the number of fund houses as small and non-viable firms looked for an exit.

Take for example, the United States where anyone can set up a Mutual Fund with Setup costs typically between $75,000 to $100,000. At the higher end, this is more or less 2x the Per Capita Income (PPP).

Indians are flocking to mutual funds like never before. The key reason is not just the strong advertising that showcases the advantages but the fact that the alternative asset classes was not delivering the goods.

Interest rates had fallen and with it being taxed at bracket levels, Fixed Deposits was not seen as appetizing. Real Estate which long had been and continues to draw investors hit a wall as after years of galloping returns, prices have more or less flattened.

During these times, Equity markets rose like a phoenix and rewarded those who were invested handsomely.

But asset classes don’t always move in a single direction. Equity markets have been going up like there is no tomorrow (these days, its mostly limited to large cap), the earnings which are not rising in the same breadth means that sooner or later, this rally too will fizzle out.

While bear markets are part and parcel of any stock market, paying excess fee can mean that your own returns are sub-optimal even though you may have had the knowledge that many others don’t when it comes to investing in equity.

With no new fund houses on the anvil, active funds in India have the upper hand. But that doesn’t mean that one has to pay through the nose for there are many a simple alternatives – Exchange Traded Funds (ETF’s) and Index funds which while not promoted can in the long term provide you similar returns thanks to their lower fee structure.

While an investor who is clueless about the world of finance may be easy to be misled, why are you, a person who knows better following the herd?

The Search for Investing Nirvana

Investing can be pretty simple and yet we assume simple isn’t good enough and keep searching for elegant solutions even if they are complex and have risks of an unknown nature. Free is discarded in favour of paid solutions even though the free ideas may have as much value as the paid ideas.

We are a product of our beliefs and biases and no matter what others say, we refuse to cow down and accept that maybe we are looking at the wrong direction.

In 2003, I had amassed enough money to become a broker at a regional stock exchange. Since at that point of time, I was also looking at investing the same into Real Estate (specifically a house), I have always wondered how life would have evolved if I had followed that direction than the one that led me to markets, full time.

While the business barely broke even even after a decade, no thanks to lack of my marketing skills, Real Estate took off like no other. But here is an interesting thought that came about when I was having a talk with a good friend of mine.

We both have been in markets for more than two decades and yet, neither of us had even invested into mutual funds – either lumpsum or systematic investing. Its not that we didn’t know of the advantages, my family first big non UTI mutual fund investment was in the year 1994.

Yet, our beliefs in our own abilities made us invest directly and while some investments worked, some didn’t, I for one never came to create a portfolio of a size that I could have had by just investing a small sum regularly. I didn’t have to buy the best fund or the second best one, all I had to do is get that nudge to invest a small sum and forget about it.

My friend wondered what if we had invested a small sum of money in funds managed by others. While returns may be more or less depending on the fund we invested, the fact would have been that we would now be the proud owners of a few millions and all this without any effort.

As he recounted this old joke,

There’s an old story about a guy taking a smoke break with his non-smoking colleague.

“How long have you been smoking for?” the colleague asks.

“Thirty years,” says the smoker.

“Thirty years!” marvels the co-worker. “That costs so much money. At a pack a day, you’re spending $1,900 a year. Had you instead invested that money at an 8% return for the last 30 years, you’d have $250,000 in the bank today. That’s enough to buy a Ferrari.”

The smoker looked puzzled.

“Do you smoke?” he asked his co-worker.

“No.”

“So where is your Ferrari?”

Many of us don’t smoke or drink, but do we really have saved more than those who spend money on such activities? There is always something else that catches our fancy and attention and onto which we would have very likely spend the money. Knowing is not the same as Doing.

On Twitter, I see financial advisors ridiculing people who invest in a large number of SIP’s. The CEO of a fund house has multiple times commented that by investing in one too many a fund they will earn nothing more than the market.

But I think what is being missed out here is the fact that, what if they aren’t really looking at beating the markets in the first place. What if the rationale for them investing in ‘n’ number of funds which has a large over-lap is to ensure better sleep at night?

Assume you have a Crore of Rupees and wish to invest in the Debt market, specifically Liquid Funds. Liquid fund returns of most fund houses are close to each other which means that you aren’t likely to do better by trying to choose one over the other.

Given that info, would you feel comfortable investing all the money in one fund or deploying the same in multiple. When the basic objective is to park money that can grow safely, would you try to maximize or diversify and ensure sounder sleep even though returns maybe a bit less or more than what you could have achieved otherwise.

If maximization of returns is your requirement, you are better off investing directly in stock versus mutual funds since you may by pure chance be invested in a stock that shoots off like nobody’s business providing you with riches you didn’t dream of obtaining.

Dynamic / Tactical Asset Allocation is a very new idea. But for long term performance, do they really add value or are they just bells and whistles that are nice to speak about but imperfect when it comes to applying them in real life?

Harry Markowitz won the Nobel Prize in Economics for his pioneering work in Modern Portfolio Theory and yet when it came to his own asset allocation, went onto allocate it equally between Equity and Debt regardless of the wonders he could have achieved by just following his own strategy.

We keep searching for the best mutual fund and the top fund of this year is not the same in the next year forgetting that simply investing in the cheapest ETF can over time maybe provide as much returns as all the constant churn would provide.

In the past I have been critical of blindly sipping into mutual funds. But thinking on lines of this being a nudge to save, a SIP in expensive markets is better off than having no SIP for we are unlikely to save the money elsewhere and instead spend in on things we may not cherish the day after purchase.

On the other hand, those who SIP forming estimations of grandeur returns thanks to historical data are likely to be disappointed as well.  SIP is a nice way to shove money into savings that may otherwise end up being spent. Will it really help you take the Trip to Europe is a different question altogether.

List of Robo Advisors in India

Robo Advisory is picking up steam in India and yet I couldn’t find a list of the same. The rationale behind the list is to provide you with links of all active / yet to start Robo Advisors in India.

The list will be updated as and when I come across new ventures. If you know of any one I may have missed, please do edit the Google Docs and insert the url. Also do post the same in the comments column so that the table below could be appended.

Robo Advisor Site Fees
arq.angelbroking.com Trailing Comission
mf.zerodha.com/ Trailing Comission
mutualfund.paisabazaar.com Trailing Comission
www.5nance.com/ Trailing Comission
www.advisesure.com/ Fee + Trailing Comission
www.arthayantra.com/ Trailing Comission
www.bharosaclub.com/ Fee Only
www.bodhik.com/ Fee (Recommend Only)
www.clearfunds.in Fee Only
www.etmoney.com/ Trailing Comission
www.finaskus.com Trailing Comission
www.fincash.com Yet to Launch.
www.fisdom.com Trailing Comission
www.fundexpert.in Trailing Comission
www.fundsindia.com/ Trailing Comission
www.fundsvedaa.com/ Trailing Comission
www.fundzbazar.com Trailing Comission
www.goalwise.com/ Trailing Comission
www.invezta.com/ Fee Only
www.moneyfrog.in Trailing Comission
www.mysiponline.com Trailing Comission
www.myuniverse.co.in/ Trailing Comission
www.orowealth.com/ Fee Only
www.piggy.co.in Fee Only
www.prosperx.com Trailing Comission
www.roboadviso.com/ Trailing Comission
www.robobanking.in Fee Only
www.scripbox.com/ Trailing Comission
www.sqrrl.in Yet to Launch.
www.taurowealth.com/ Stocks. No MF’s. Fee
www.tavaga.com Fee Only
www.unovest.co/ Fee Only
www.vivekam.co.in Trailing Comission
www.wealthtrust.in Fee Only
www.wealthy.in/ Trailing Comission
www.wixifi.com/ Fee (% of AUM)

Google Spreadsheet (Link)

Index funds or Index ETF / ETS

While passive investing is yet to pick up in India, almost all Mutual funds offer a choice of Index funds which try to track returns generated by Nifty / Sensex. But when one does go the passive way, should one invest in Index funds or with Exchange Traded Funds is the key question.

The answer as the following graphic shows is a no brainer

Chart

Unlike actively managed mutual funds where stock picking ability is the key differentiator of returns, in the world of passive, it comes down to one and one thing only. How much is the fund house charging to provide you Index returns. The lower the charges, higher is your return (and closer to what Nifty TRI shall deliver).

Above list contains only funds with track record of 5 years and hence misses out on funds such as SBI ETF Nifty 50 which has a amazingly low Expense Ratio of 0.07%.

Further Reading: David and Goliath: Who Wins the Quantitative Battle?

Fund Fees and Future Returns – Morningstar