Quantum Mutual Fund launching India’s first Nifty 50 ETF Fund Of Fund (FoF) claiming as a brand new type of product. As Index funds are gaining reputation amongst Indians, do you have to spend money on Quantum Nifty 50 ETF Fund of Fund NFO?
Everyone knows that Index Funds are gaining reputation 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 attempting their encash this pattern by launching one-by-one Index Funds. Nonetheless, is it price contemplating all these Index Funds simply because the tagline is INDEX FUND?
Quantum Nifty 50 ETF Fund of Fund NFO – Do you have to 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They’ve their very own 14 years outdated underlying the Nifty 50 ETF.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, if you happen to spend money on 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 whole price is lower than the obtainable 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, certainly one of my weblog readers pointed that the taxation of such funds is as like Fairness Funds. As a result of underneath Sec.10(23D), it was clearly talked about as beneath.
- A Minimal of 90% of the whole proceeds of such fund is invested within the items of such different fund; and
- Such different fund additionally invests a minimal of 90% of its whole proceeds within the fairness shares of home corporations listed on a acknowledged inventory trade, and
With this, it’s clear that as underlying ETF and this NFO make investments a minimum of 90% in underlying ETF and ETF once more in Indian shares means the taxation of this NFO is like an fairness fund. It is a positivity of this product (relatively than the negativity that I assumed earlier with the incorrect notion that taxation is sort of a debt fund).
# Monitoring Error or Monitoring Distinction –
Should you don’t know what’s monitoring error and monitoring distinction, then confer with my newest submit “Monitoring Distinction Vs Monitoring Error of ETF and Index Funds“. It’s important to face two forms 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 will’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, despite the fact that Quantum Mutual Fund firm could also be claiming this as India’s first Nifty 50 ETF Fund Of Fund, higher to IGNORE. Fairly 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 prevailing Nifty 50 Index Funds.
I believe it’s a futile train from a mutual fund firm by making a type of gimmick. As an alternative, 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.