I am just back from a sabbatical to Hongkong and the first thing which hits you when you land at Mumbai is the pathetic infrastructure which we have in the financial capital of a “supposedly aspiring superpower”. At the Mumbai CSIA, passengers who were travelling from abroad had no trolleys to collect their baggage. It is not that trolleys are not there. Just that the ground staff responsible for ensuring the same was not doing its job. From the International terminal I had a transfer to the domestic to catch another flight into the hinterland of the country, there also the driver responsible to do eight hours of duty wanted to do his hours with minimum number of trips. From every passenger he wanted a “baksheesh” or “kharcha paani”. I had to tell him, “Does an army guy ask for kharcha paani for the job he does for you? Or does the farmer who grows the food that you eat, ask for kharcha paani? What I am arriving at is that this shows our productivity parameters for one and our innate sense of duty and responsibility for another. The contrast is glaring because one is coming back from a country which is a giant in infrastructure and one of the best places to do business in. Undoubtedly, we shall take another 30 years for any one of our cities or Union territories to match that scale. But this blog is not about the state of the nation, it is about finances.
The recently announced SEBI ruling of hiking the percentage of expenses that can be charged as expenses to mutual fund (MF) investors is a setback to all small investors. The MF industry stands to gain by charging a higher percentage of expense on your money invested by the fund house. Fund houses have increased the expenses by a straight 0.5% to start with. Apart from the service tax and other implications which will kick in subsequently.
Out of the two thousand odd schemes of hundreds of fund houses, Quantum MF again outshines the rest. I have been always advocating through this blog that the best schemes for a long term investor are from the Quantum Asset Management Company. A maverick fund house which does its own thing. They were the first to cut out the agents and advisors. They do not pay any commissison to anyone, thus increasing the return for the investor. All they want is for the investor to directly deal with them through their website or collection offices. Somewhat like Amway. High quality at lesser costs. They have lesser funds to manage, about Rs225 crore in all their schemes put together and run a tight ship. Compare this with HDFC which manages funds close to Rs100,000 crores. In businesses, giants slow down like elephants whereas smaller businesses grow like tigers, at a faster pace. Even earlier their expense ratio was the least, so was their stock churn and turnover. But by publicly announcing that, inspite of SEBI permitting higher fund expenses, they will maintain their expenses at only 1.25%, the fund managers have shown their earnestness in being investor friendly at heart and in intent.
An expense of 1.25% vs 2.25% looks very meager. But take out your calculators and calculate on an investment of Rs 2,00,000 per year for 20 years and you will find that the difference will be more than Rs 5 Lakhs. And fund houses are going to charge you close to 3% and not 2.25% which I have calculated for. We need another Kejriwal to wake up the sleeping investors.
So, take my advice for whatever it is worth. Put all your fresh mutual fund investments into Quantum Mutual Funds (they don’t give commission to anyone, and I am not peddling for them )