MFs in India [Mutual Funds]

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arnott
Posts: 6
Joined: Fri Jul 13, 2018 3:45 pm

MFs in India [Mutual Funds]

Post by arnott » Fri Jul 13, 2018 3:53 pm

hi all,

I am looking for advice on MF investing in India. I am new to investing and John Bogle's ideas. The last 3 months have been eye opening to say the least.

I live in the US, and I like the index fund approach using vanguard funds. Is it possible to do this in India ? My dad, who is retired, needs to put some money in some MFs. Looks like in India, all funds have high expense ratios and high front and back end expenses too.

Can someone point me to some good mutual funds with reasonable expense ratios and cost ?

Thanks,
Arnott

Update:
My father is an Indian citizen. I will not be investing.
Last edited by arnott on Mon Jul 16, 2018 8:33 am, edited 1 time in total.

Valuethinker
Posts: 35666
Joined: Fri May 11, 2007 11:07 am

Re: MFs in India [Mutual Funds]

Post by Valuethinker » Sat Jul 14, 2018 6:23 am

arnott wrote:
Fri Jul 13, 2018 3:53 pm
hi all,

I am looking for advice on MF investing in India. I am new to investing and John Bogle's ideas. The last 3 months have been eye opening to say the least.

I live in the US, and I like the index fund approach using vanguard funds. Is it possible to do this in India ? My dad, who is retired, needs to put some money in some MFs. Looks like in India, all funds have high expense ratios and high front and back end expenses too.

Can someone point me to some good mutual funds with reasonable expense ratios and cost ?

Thanks,
Arnott
Are there India listed ETFs?

The India index is so narrow that international diversification would be a good idea. Alas foreign exchange controls could prevent this?

newdoc123
Posts: 5
Joined: Tue Feb 28, 2017 9:29 pm

Re: MFs in India [Mutual Funds]

Post by newdoc123 » Sat Jul 14, 2018 6:53 am

i recommended my father.. UTI's NIFTY 50 which is an index fund.. lowest expense ratio... 0.1% they claim to be passively index.. i recommended the direct plan..
good luck..

tenkuky
Posts: 483
Joined: Sun Dec 14, 2014 4:28 pm

Re: MFs in India [Mutual Funds]

Post by tenkuky » Sat Jul 14, 2018 9:42 am

I would check on whether a US-based person can invest in MFs in India, not all brokerage houses permit that.
Another issue is FATCA reporting requirements and how easy will it be to get documentation for this. It means additional paperwork at tax time.
And there is the forex equation: YTD, the rupee has depreciated against the $ by about 7%.
All things to think about before investing.

Mors
Posts: 192
Joined: Wed Aug 16, 2017 10:06 am

Re: MFs in India [Mutual Funds]

Post by Mors » Sat Jul 14, 2018 4:32 pm

Here you will find all the ETFs available to the Indian stock exchange.

https://en.wikipedia.org/wiki/List_of_I ... aded_funds

I see it lacks international exposure, other than Motilal Oswal Mutual Fund - Motilal Oswal MOSt Shares Nasdaq Index N100 ETF.

You can also help yourself finding the cheapest funds here: https://www.valueresearchonline.com/fun ... se&cat=118

Look to diversify with International stocks as much as possible.

core4portfolio
Posts: 219
Joined: Thu Dec 26, 2013 2:12 pm

Re: MFs in India [Mutual Funds]

Post by core4portfolio » Sat Jul 14, 2018 5:05 pm

Based on asset allocation, you can go. IMHO index funds doesn’t performed well in India due to some reason . Returns are vastly differeniate and active fund managers were beating it very easily. For instance HDFC Mid cap fund, ICICI blue chip fund etc..Choose one AMC and go with that. IDFC have index fund which will be very cheap nifty index funds.
I generally recommend HDFC Balanced fund renamed as HDFC hybrid equity fund - Growth Direct mode as portfolio’s only one fund (65% stock and 35% bonds ) which will take care of all. But it’s expense ratio is higher for its convenience.
Allocation : 80/20 (80% TSM, 20% TBM) | Need to learn fishing sooner

TedSwippet
Posts: 1804
Joined: Mon Jun 04, 2007 4:19 pm

Re: MFs in India [Mutual Funds]

Post by TedSwippet » Sun Jul 15, 2018 3:26 am

arnott wrote:
Fri Jul 13, 2018 3:53 pm
I live in the US, and I like the index fund approach using vanguard funds. Is it possible to do this in India ? My dad, who is retired, needs to put some money in some MFs. Looks like in India, all funds have high expense ratios and high front and back end expenses too. Can someone point me to some good mutual funds with reasonable expense ratios and cost ?
Assuming that your father lives in India and is not a US citizen or US green card holder, his best route to Vanguard funds would probably be to buy Vanguard Ireland domiciled ETFs on the London (or other European) stock exchange.

India has an income tax treaty with the US, but the dividend rate is 25% and so hardly any better than the 30% non-treaty rate, and in particular is worse than the 15% US/Ireland rate. India has no estate tax treaty with the US, and so anything above $60k in US assets would be at risk of 40% US estate taxes.

More in these wiki pages:
Nonresident alien's ETF domicile decision table - Bogleheads
Nonresident alien taxation - Bogleheads
Nonresident alien with no US tax treaty & Irish ETFs - Bogleheads

gotester2000
Posts: 552
Joined: Sun Nov 12, 2017 1:59 am

Re: MFs in India [Mutual Funds]

Post by gotester2000 » Sun Jul 15, 2018 6:16 am

If your father is an Indian citizen and resident he can invest there. Most AMCs do not allow US resident to invest in their MFs due to FATCA.
Active beats passive comfortably there - index is narrow so not recommended. Just buy a large cap,multi cap and mid cap from 3 different AMC and go direct.

arnott
Posts: 6
Joined: Fri Jul 13, 2018 3:45 pm

Re: MFs in India [Mutual Funds]

Post by arnott » Mon Jul 16, 2018 9:29 am

Valuethinker wrote:
Sat Jul 14, 2018 6:23 am
Are there India listed ETFs?

The India index is so narrow that international diversification would be a good idea. Alas foreign exchange controls could prevent this?
Thanks. There are ETFs in India, but they seem to have high risk.

arnott
Posts: 6
Joined: Fri Jul 13, 2018 3:45 pm

Re: MFs in India [Mutual Funds]

Post by arnott » Mon Jul 16, 2018 9:30 am

newdoc123 wrote:
Sat Jul 14, 2018 6:53 am
i recommended my father.. UTI's NIFTY 50 which is an index fund.. lowest expense ratio... 0.1% they claim to be passively index.. i recommended the direct plan..
good luck..
Thanks. Saw UTI's NIFTY 50. Is your father happy with its performance ?

arnott
Posts: 6
Joined: Fri Jul 13, 2018 3:45 pm

Re: MFs in India [Mutual Funds]

Post by arnott » Mon Jul 16, 2018 9:43 am

tenkuky wrote:
Sat Jul 14, 2018 9:42 am
I would check on whether a US-based person can invest in MFs in India, not all brokerage houses permit that.
Another issue is FATCA reporting requirements and how easy will it be to get documentation for this. It means additional paperwork at tax time.
And there is the forex equation: YTD, the rupee has depreciated against the $ by about 7%.
All things to think about before investing.
This is for my father, who lives in India. He wants to invest in some MFs in India.

arnott
Posts: 6
Joined: Fri Jul 13, 2018 3:45 pm

Re: MFs in India [Mutual Funds]

Post by arnott » Mon Jul 16, 2018 10:10 am

Mors wrote:
Sat Jul 14, 2018 4:32 pm
Here you will find all the ETFs available to the Indian stock exchange.

https://en.wikipedia.org/wiki/List_of_I ... aded_funds

I see it lacks international exposure, other than Motilal Oswal Mutual Fund - Motilal Oswal MOSt Shares Nasdaq Index N100 ETF.

You can also help yourself finding the cheapest funds here: https://www.valueresearchonline.com/fun ... se&cat=118

Look to diversify with International stocks as much as possible.
Thanks, will look in to different funds. Are ETFs in India riskier than Mutual funds ?

NYGiantsFan
Posts: 129
Joined: Fri Aug 17, 2012 7:59 am

Re: MFs in India [Mutual Funds]

Post by NYGiantsFan » Mon Jul 16, 2018 12:09 pm


Mors
Posts: 192
Joined: Wed Aug 16, 2017 10:06 am

Re: MFs in India [Mutual Funds]

Post by Mors » Mon Jul 16, 2018 4:09 pm

arnott wrote:
Mon Jul 16, 2018 10:10 am
Mors wrote:
Sat Jul 14, 2018 4:32 pm
Here you will find all the ETFs available to the Indian stock exchange.

https://en.wikipedia.org/wiki/List_of_I ... aded_funds

I see it lacks international exposure, other than Motilal Oswal Mutual Fund - Motilal Oswal MOSt Shares Nasdaq Index N100 ETF.

You can also help yourself finding the cheapest funds here: https://www.valueresearchonline.com/fun ... se&cat=118

Look to diversify with International stocks as much as possible.
Thanks, will look in to different funds. Are ETFs in India riskier than Mutual funds ?
I do not know, but they shouldn't be.

CarpeDiem22
Posts: 90
Joined: Tue May 22, 2018 11:20 pm

Re: MFs in India [Mutual Funds]

Post by CarpeDiem22 » Tue Jul 17, 2018 6:29 am

On Equity side, here are some good options:

1. ICICI Prudential S&P BSE 500 ETF (ER 0.30%): Covers 95% of the free-float market capitalisation of Indian stock market, very thinly traded though. Akin to Total Stock Market for India.
2. ICICI Prudential Nifty ETF (ER 0.05%): Tracks Nifty 50 Index.
3. Reliance ETF Junior BeES (ER 0.20%): Tracks Nifty Next 50 Index
5. Motilal Oswal Midcap 100 ETF (ER 0.23%): Tracks Nifty Midcap 100 Index
6. Motilal Oswal NASDAQ 100 ETF (ER 1.50%): Tracks Nasdaq 100 Index
7. Reliance ETF Hang Seng BeES (ER 1.12%): Tracks Hang Seng Index

On Debt side, you're out of luck, as only 10-year Gilts are available as indexed funds:
1. Reliance ETF Long Term Gilt (ER 0.04%): Tracks Nifty 8-13 year G-Sec index, very thinly traded.

arnott
Posts: 6
Joined: Fri Jul 13, 2018 3:45 pm

Re: MFs in India [Mutual Funds]

Post by arnott » Tue Jul 17, 2018 10:57 am

Thanks for the replies everyone.

Will go through all the info, and I will give a suggestion for my dad. Will update here.

Stider1
Posts: 1
Joined: Mon Oct 16, 2017 5:21 am

Re: MFs in India [Mutual Funds]

Post by Stider1 » Tue Jul 17, 2018 12:41 pm

For India, I would recommend using Funds rather than ETFs (liquidity concerns) & always choose 'Direct Growth' plans.

If you are convinced of indexing, then use NIFTY50 + NIFTY NEXT50 index funds & a good Mid-Small Cap Active fund for equity exposure (e.g. UTI NIFTY50 - 60%, ICICI NIFTY NEXT 50 - 25% & Franklin India Smaller Companies - 15%).

newdoc123
Posts: 5
Joined: Tue Feb 28, 2017 9:29 pm

Re: MFs in India [Mutual Funds]

Post by newdoc123 » Tue Jul 17, 2018 4:41 pm

I claim myself to be an ideal boglehead (if such term exist)... so i told me dad.. pick the nifty50 index.. and invest ... over longterm you will do better than the market.. as always you have be in more atleast than 3 years in an index to see it beat other managed funds (from the litte red book of investing by jack bogle).
I did look into nifty50 next... i felt it is too cheesy.. pick the 50 best stocks. stick to it .. why look for the next 50 big.. you are focusing on passive index investing ... and if you believe in it . then follow it

CarpeDiem22
Posts: 90
Joined: Tue May 22, 2018 11:20 pm

Re: MFs in India [Mutual Funds]

Post by CarpeDiem22 » Tue Jul 17, 2018 11:44 pm

newdoc123 wrote:
Tue Jul 17, 2018 4:41 pm
I claim myself to be an ideal boglehead (if such term exist)... so i told me dad.. pick the nifty50 index.. and invest ... over longterm you will do better than the market.. as always you have be in more atleast than 3 years in an index to see it beat other managed funds (from the litte red book of investing by jack bogle).
I did look into nifty50 next... i felt it is too cheesy.. pick the 50 best stocks. stick to it .. why look for the next 50 big.. you are focusing on passive index investing ... and if you believe in it . then follow it
The market regulator in India defines large-cap as 100 largest stocks in the market, and allows large cap mutual funds to invest up to 20% of their assets in midcap/smallcap stocks. If 100% of your assets are tracking 50 largest stocks, I doubt you can beat the actively managed funds even in the long term. I would recommend tracking at least 100 largest stocks. If ETFs are to be avoided for liquidity concern, HDFC Nifty Index Fund - Direct (ER 0.15%) and ICICI Prudential Nifty Next 50 Fund - Direct (ER 0.44%) are two good options; split the assets between these two. (I should mention that even if you decide to passively track Nifty50 index, you may underperform active funds but you'll still do better than a huge army of individual investors. You see, investor return is often much less compared to fund return as investors chase performing funds).

In Bogle's book, he talks about S&P 500 index that covers around 85% of US stock market capitalisation, compared to Nifty50 that covers around 64% for India. Nifty 50 + Nifty Next 50 Index bring this up to 75%. Another point of difference from S&P 500 is that indices in India are very top heavy, meaning large cap stocks are very large and small cap stocks are very small.

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