What are the Benefits of Investing in a Low-Cost Mutual Fund?

Posted On Tuesday, Oct 30, 2012


Investing in a mutual fund might definitely help you invest your earnings optimally, but you could maximize your mutual fund savings or let's say earnings by choosing the right mutual fund. So how do you choose the right mutual fund?

While picking a fund to invest in, is not science mammoth task, one needs to make sure that their investment objective matches that of the fund’s investment objective. But is that enough for you to make sure that your fund will live up to your expectations?

The one basic thing that you could check out before investing your hard earned money in any fund is the "Expense" incurred by the AMC / fund house. This is basically the Total TER (TER) including the investment management fees that the AMC charges you for your investment with them.

And with SEBI's new regulations in place AMCs have further got a leeway of hiking the limits on TER, things are going to be more difficult for investors otherwise. The AMCs can now charge you anywhere up to 3% (inclusive of 30 bps for Cities beyond the Top 15 Cities) of your investment amount. While this 3% might look a negligible amount at first, if you sit to calculate, you would be surprised to see its impact on your savings.

This is where a low-cost mutual fund could come to your rescue. A low-cost mutual fund scheme charges you low TER for investing in their fund.

Quantum Mutual Fund - India’s first dedicated, direct-to-investor mutual fund house abides by its stand that it is a low-cost mutual fund. Being direct-to-investor, we automatically slash your distribution charge and thus more of your money gets invested.

At an TER of 1.25%, our flagship fund Quantum Long Term Equity Fund is already one of the most low-cost managed fund in the industry, while others in the same category charge may charge you more than 1.25%.

To further elaborate this point your amount invested in stocks by a scheme is minus the TER which is eventually your investible corpus. That is if you invest in Fund A that has a higher TER less amount will be invested and if you invest in Fund B with low TER then more amount gets invested in stocks. The difference of that extra amount that gets invested in Fund B (stocks) eventually in long term will make a lot of difference, subject to the fund performance.

If you, as an investor, have a long term perspective to build a huge corpus, with lower TER is money saved with the rest of your investment, thereby adding to your corpus. This will eventually fetch you higher returns subject to the performance of the fund. Further with the power of compounding, your savings that are converted into earnings get a whole new meaning. Compounding returns yields better results when money is saved over long term.

In this way small smart decisions can bring a big positive change to your investments which could be of great help for your rainy day and nevertheless you don’t want your hard earned money fill other's pockets, do you?

Risk Factors: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Please visit – www.quantumamc.com/disclaimer to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the scheme's objective will be achieved and the NAV of the scheme(s) may go up or down depending upon the factors and forces affecting securities markets. Investment in mutual fund units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the Sponsor / AMC/ Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited (AMC). The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

Above article is authored by Quantum.

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