{"id":14878,"date":"2011-09-08T14:19:49","date_gmt":"2011-09-08T08:49:49","guid":{"rendered":"index.php\/2011\/09\/08\/are-mutual-funds-worth-it\/"},"modified":"2011-09-08T14:19:49","modified_gmt":"2011-09-08T08:49:49","slug":"are-mutual-funds-worth-it","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2011\/09\/08\/are-mutual-funds-worth-it\/","title":{"rendered":"Are mutual funds worth it?"},"content":{"rendered":"
\"Mutual<\/a> <\/p>\n

Image via Wikipedia<\/a><\/p>\n<\/div>\n

There a mind-boggling number of mutual funds operating in India. According to the AMFI, there are about 42 fund houses, offering more than 4500<\/strong> funds! They span equities, fixed-income<\/a> and hybrids with a whole host of options available for pay-outs, tax-planning, etc. With so much on offer, one would think that there must be a solid value proposition that allows so many players in the market.<\/p>\n

However, it appears that most mutual funds in India underperform<\/strong><\/em> their benchmarks! According to a June 2011 study by CRISIL<\/a>:<\/p>\n

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Among equity-oriented funds, majority of large cap and diversified equity funds underperformed their benchmark indices, viz, the S&P CNX Nifty<\/a> and the S&P CNX 500, respectively, in all three time periods of analysis (1, 3 and 5 years). <\/p>\n<\/blockquote>\n

In case of equity-linked saving schemes (ELSS), majority of funds have underperformed the
benchmark S&P CNX 500 over the 3 and 5 year time frames. The ELSS category (investments are intended for tax saving and typically have a 3-year lock-in) witnessed 57% and 65% of the funds underperforming the benchmark S&P CNX 500 over the 3 and 5 year time frames, respectively.<\/p>\n

Here\u2019s a snippet from the report<\/a>:<\/p>\n

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So the question remains: why are investors paying asset management fees to fund-managers for under-performing the benchmarks? Why not invest in ETFs<\/a> where you are at least tracking the market (at a much<\/em> lower fee)?<\/p>\n

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