Quantum Mutual Fund launching India’s first Nifty 50 ETF Fund Of Fund (FoF) claiming as a brand new sort of product. As Index funds are gaining recognition amongst Indians, must you put money into Quantum Nifty 50 ETF Fund of Fund NFO?
Everyone knows that Index Funds are gaining recognition amongst Indians. Primarily due to clear definitions of funds primarily based on SEBI Recategorization, constant underperformance of main lively funds, low price, and ease.
Mutual Fund corporations making an attempt their encash this development by launching one-by-one Index Funds. Nonetheless, is it value contemplating all these Index Funds simply because the tagline is INDEX FUND?
Quantum Nifty 50 ETF Fund of Fund NFO – Must you make investments?
I’m a staunch believer in index funds. Nonetheless, on the similar time, I’m lethal towards the gimmick these mutual fund corporations create in us by encashing our temper. The basic instance is Quantum Nifty 50 ETF Fund of Fund NFO. The explanations are as beneath.
# Price –
They’ve their very own 14 years previous underlying the Nifty 50 ETF. The price of this ETF as per their declaration is 0.094%. That is clearly a low price in comparison with typical Index Mutual Funds (not ETF to ETF). Nonetheless, in the event you put money into Quantum Nifty 50 ETF Fund of Fund, then you must bear two prices. One is the underlying ETF price and the second is the Quantum Nifty 50 ETF Fund of Fund price. Therefore, it’s a double costing product for us. Nonetheless, if the overall price is lower than the accessible Nifty 50 Index Funds, then we could say that it’s cost-effective. In any other case, a waste product.
# Taxation –
Earlier I’m of the opinion that as it’s a Fund Of Fund, the taxation is like Debt Fund. Nonetheless, considered one of my weblog readers pointed that the taxation of such funds is as like Fairness Funds. As a result of below Sec.10(23D), it was clearly talked about as beneath.
- A Minimal of 90% of the overall proceeds of such fund is invested within the models of such different fund; and
- Such different fund additionally invests a minimal of 90% of its complete proceeds within the fairness shares of home corporations listed on a acknowledged inventory alternate, and
With this, it’s clear that as underlying ETF and this NFO make investments not less than 90% in underlying ETF and ETF once more in Indian shares means the taxation of this NFO is like an fairness fund. This can be a positivity of this product (moderately than the negativity that I assumed earlier with the fallacious notion that taxation is sort of a debt fund).
# Monitoring Error or Monitoring Distinction –
If you happen to don’t know what’s monitoring error and monitoring distinction, then check with my newest submit “Monitoring Distinction Vs Monitoring Error of ETF and Index Funds“. It’s a must to face two sorts of monitoring errors and monitoring variations right here. One is the underlying ETF monitoring error and distinction and one other is that this fund’s monitoring error and distinction. Have a look at the newest monitoring error and monitoring distinction of this ETF.
Despite the fact that monitoring errors and variations look much less, your Quantum Nifty 50 ETF Fund of Fund will add extra monitoring errors and monitoring variations. As a result of they’ll’t replicate 100% of the monitoring error and monitoring distinction of underlying ETF.
# Liquidity, SIP, and Demat Account –
This product could also be pushed to you by saying you’ll not face any liquidity points, SIP is feasible (however not in ETF), and Demat account necessities like underlying ETF. It’s true. Nonetheless, simply by these three options of this product, one can’t ignore the bills and monitoring errors or distinction pointers.
Therefore, contemplating extra negatives than positives, though Quantum Mutual Fund firm could also be claiming this as India’s first Nifty 50 ETF Fund Of Fund, higher to IGNORE. Moderately both select the direct ETF (if you’re effectively versed with the way it works like promoting, shopping for, and Demat account necessities) or just choose the present Nifty 50 Index Funds.
I believe it’s a futile train from a mutual fund firm by making a sort of gimmick. As a substitute, they could have created a easy low-cost Nifty 50 Index Fund.
At all times be cautious with the strikes of mutual fund corporations. In case your requirement is real, then make investments. Else, an upfront NO is much better.
