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.
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?
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