Was reading the Q4 trend reviews by Morningstar and came across this stunning graph. Well, if you even have the elementary understanding of trends in mutual funds, then you’d be aware that there is a great cost migration in the US. i.e. from active to passive and this has resulted in a massive fee war, largely perpetuated by Vanguard. Today, in the US, you can build a core portfolio at a cost of less than 10 basis points – that’s goddamn crazy.
Back home in India, Indian investors are still being ripped off with high expense ratio funds being showed down their unwitting throats by distributors. The sad truth is that Indian investors don’t give a shit about costs. If they did, then they wouldn’t get sucked in such funds. It looks like we still have a long time to go before investors realize the importance of costs.
I was just checking Morningstar and I found 27 close ended funds which had 3% expense ratios, that’s is crazy!
| Fund | Expense Ratio |
| BOI AXA Midcap Tax Fund – Series 1 Regular Dividend | 3.25 |
| BOI AXA Midcap Tax Fund – Series 1 Regular Growth | 3.25 |
| Sundaram LT Tax Ad Sr IV Reg DP | 3.14 |
| Sundaram LT Tax Ad Sr IV Reg Ds | 3.14 |
| Sundaram LT Tax Ad Sr IV Reg Gr | 3.14 |
| Sundaram Multi Cap Ser II Regular Dividend Payout | 3.14 |
| Sundaram Multi Cap Ser II Regular Dividend Sweep | 3.14 |
| Sundaram Multi Cap Ser II Regular Growth | 3.14 |
| SBI Tax Advantage Fund Series II Dividend | 3.13 |
| SBI Tax Advantage Fund Series II Growth | 3.13 |
| SBI Long Term Advantage Fund Series I Regular Dividend | 3.11 |
| SBI Long Term Advantage Fund Series I Regular Growth | 3.11 |
| SBI Long Term Advantage Fund Series II Regular Dividend | 3.1 |
| SBI Long Term Advantage Fund Series II Regular Growth | 3.1 |
| SBI Tax Advantage Fund Series III Regular Dividend | 3.1 |
| SBI Tax Advantage Fund Series III Regular Growth | 3.1 |
| Sundaram Multi Cap Ser I Regular Dividend Payout | 3.07 |
| Sundaram Multi Cap Ser I Regular Dividend Sweep | 3.07 |
| Sundaram Multi Cap Ser I Regular Growth | 3.07 |
| Sundaram Emerging Small Cap Ser V Regular Dividend Payout | 3.04 |
| Sundaram Emerging Small Cap Ser V Regular Dividend Sweep | 3.04 |
| Sundaram Emerging Small Cap Ser V Regular Growth | 3.04 |
| Sundaram Emerging Small Cap Ser VI Regular Dividend Payout | 3.02 |
| Sundaram Emerging Small Cap Ser VI Regular Dividend Sweep | 3.02 |
| Sundaram Emerging Small Cap Ser VI Regular Growth | 3.02 |
| Sundaram Emerging Small Cap Ser VII Regular Dividend Payout | 3.01 |
| Sundaram Emerging Small Cap Ser VII Regular Growth | 3.01 |
In spite of the recent reduction in expense ratios, there are still 6 open-ended regular mutual funds with expense ratios of more than 3%.
| Fund | Expense Ratio |
| Reliance Consumption Fund | 3.15 |
| Baroda Midcap Fund | 3.07 |
| Principal Dividend Yield Fund | 3.01 |
| Canara Robeco Bluechip Equity Fund | 3 |
| DHFL Pramerica Diversified Equity Fund | 3 |
| Union Value Discovery Fund | 3 |
This is in spite of passive funds and ETFs being available for almost free
| Nifty 50 index funds | |
| Fund | Expense ratio |
| UTI Nifty Index Fund | 0.0013 |
| HDFC Index Fund-NIFTY 50 Plan | 0.001 |
| ICICI Prudential Nifty Index Fund | 0.0032 |
| SBI Nifty Index Fund | 0.0025 |
| Franklin India Index Fund – NSE Nifty Plan | 0.007 |
| Nifty Next 50 index funds | |
| Fund | Expense ratio |
| UTI Nifty Index Fund | 0.0013 |
| HDFC Index Fund-NIFTY 50 Plan | 0.001 |
| ICICI Prudential Nifty Index Fund | 0.0032 |
| SBI Nifty Index Fund | 0.0025 |
| Franklin India Index Fund – NSE Nifty Plan | 0.007 |
| Nifty 50 ETF | |
| ETF | Expense ratio |
| SBI ETF Nifty 50 | 0.0007 |
| UTI Nifty Exchange Traded Fund | 0.0007 |
| Reliance ETF Nifty BeES | 0.0011 |
| ICICI Prudential Nifty ETF | 0.0005 |
| Kotak Nifty ETF | 0.001 |
| Nifty Next 50 ETF | |
| ETF | Expense ratio |
| Reliance ETF Junior BeES | 0.0023 |
| Aditya Birla Sun Life Nifty Next 50 ETF | 0.0005 |
| UTI Nifty Next 50 Exchange Traded Fund | 0.0022 |
| SBI ETF Nifty Next 50 | 0.002 |
| ICICI Prudential Nifty Next 50 ETF | 0.0015 |
I haven’t really accounted for tracking error and nor have I sorted these funds based on how cheap they. Even so, they are damn cheap. Any investor today, can certainly do worse than a combination of Nifty 50 + Nifty Next 50
