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JumpyPotato
JumpyPotato
Deloitte

Mutual find VS ETF

In my last 5 years of investing in MF, only hdfc top 100 fund has outperformed index. The return of other mutual fund miss the index by 0.5-1%. Though this is not big, paying expense ratio and still underperforming makes less sense to me.

For the next 5 years, I am planning to stop SIP in the funds and directly SIP in etf.

Would love to have your view/advice on the same. Thanks in advance!

16mo ago
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PeppyCoconut
PeppyCoconut
Stealth16mo

I’m currently sticking to index funds and regarding ETFs they are lucrative in the US but not that popular here in India.

So liquidity might become a problem during market corrections/downturns.

I’d say research a bit more.

JumpyPotato
JumpyPotato
Deloitte16mo

Isn’t etf’s fairly liquid? Like, liquid as a stock?

PeppyCoconut
PeppyCoconut
Stealth16mo

From what I’ve read and understood, not as much as a mutual fund with decent AUM.

Stocks can also get illiquid.

For me- It UTI Index fund, PPFAS Flexi-Cap, SBI Liquid fund.

Will look into ELSS from Quant/PPFAS for tax saving, when required.

JazzyNarwhal
JazzyNarwhal
Stealth16mo

Index funds are OK. But your understanding of mutual funds return is wrong. SIP doesn't give you more or better returns. SIP is just a mode of investment "not a strategy" like it is advertised. Let's say the distance between point A and point B is 10 km. Person 1 journey time is just 15 min as he started early morning, Person 2 is 1 hour, Person 3 is 2 hours because he started on a worst day so stuck in a traffic jam. Mutual fund returns are also the same. Returns vary depending on when you invest also. SIP is just a convenience. Apps, Internet, social media markets SIP just to ensure you stay with them for longer creating an impression it averages ups and downs. It doesn't guarantee higher returns or even not necessarily index beating returns. Selecting the right fund and investing for the long term whether SIP or lump sum or manual investing is a good thing to do. It will be a never ending debate to choose between active vs passive funds. As long as the world is active/dynamic i prefer active funds. There are situations where I chose passive funds too because active is more risky. Nevertheless, all the best. You will still do a lot better with Index funds than someone without investing.

I'm a NISM certified mutual fund distributor and IRDAI licensed insurance advisor.

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