Mutual Funds- Eating your profits via Fees?

Hello Guys.

I Started investing into Mutual Funds around 2.5 to 3 years back, doing an sip of 10000 x 2 funds every month and still doing so.
Invested in Motilal Oswal and Mirae Asset
Over the years the returns are just negligible and at this moment it is slightly around 1% loss.
My question is that do mutual funds really give us good returns ?
My personal observation is that the mutual funds reciprocate market crash, as the market goes down mutual funds will go down in similar percentage but while market is gaining it is not the same.
Due to high fees of its advisers etc does this happen or i am into bad funds.

I am currently thinking to stop my sip and keep aside funds every month for direct investment into equity.


I also started around 2017 to invest in mutual funds and direct investment too. But to take off this doubt of paying high fee or charges to MF , I started buying only direct MF from zerodha coin.

From last 3 years what I observed is, investing in MF is a long journey and we should be very careful with fund selection. We usually compare last 5 years returns while selecting funds and most of the times it works but need some long horizon based on market conditions.

Sometimes prominent names may perform worse than subdue names. Ex, SBI small cap fund is far better than hdfc small cap fund. But ppl may fall in love with HDFC brand and choose it’s over SBI (at least I did that mistake).

But having multicap and index funds along with US funds (Franklin US feederor motilal NASDAQ) can give good balance to once portfolio where we can mitigate the risks over long time period.

So judging MF performance from last 3 years is not a ideal to take decision. Rest all you can go through MF portfolio and deep down into their holdings to understand why it’s underperforming compare to overall market.


I’ve never had success with mutual funds. They’ve just offered flat returns in the past for me. However,sector specific funds make sense… for eg if you identify a sector with good tailwinds for a few years then buy a fund which specialises in that sector(for eg a pharma mutual fund or a chemicals fund). General mutual funds have companies in every sector and get pulled in so many different directions that sometimes they go nowhere. I prefer making my own portfolios now obviously. Have had a LOT more success … plus I love receiving dividends and attending Concalls lol


@venkat457 what i mean is mutual funds pay themselves more and that is why overall returns for us is flat. I have been patient for 3 years but this is a feeling which i am getting that the overall returns are not being passed to the investor.

Bench mark indices itself low single digit return gave last 3yrs. So it’s hard to beat indices nowadays . But if you consider really long term horizon it will work fine. You may consider How volatile your fund CompRe to benchmark . Lot of patient required to hold your MF . I believe 3yrs is not enough for MF . May consider more longer term…

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Its not bad to DIY but always remember that you need to have some skills developed before taking a direct plunge else there are chances of burning your fingers. Telling from my personal experience. Though after gaining knowledge in last 5 years, things are better in terms of approach. If you think MF not doing great, buy ETF which will give you at least index returns.

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  1. 3 years is very less time to judge it’s merit or demerits. Even more so when you entered in 2017 a bull market and planning to exit now a bearish market stuck with an unique phenomenon called covid 19.

  2. Mutual funds don’t only take fees to beat index when market rises, it also provided downside protection i.e fall less when market falls through active management. Eg: if yes bank was part of index, a bad news will make sure your return in that index keeps falling to the extent of Yes banks weightage till it’s part of the index. An active fund manager may sell ot immediately hence giving you downside protection.
    Not every manager can do this totally and all the time. So selecting the fun manager is important. I try to see interviews and articles by a fund manager and understanding his psyche and investing philosophy before putting money in any fund.
    2 favourite fund managers of mine are : Rajeev Thakkar+Raunak onkar and Neelesh Surana.

  3. When choosing funds, I make sure I don’t pay too high expense ratio. A small fund charging a 1.4-1.5% is still fine if it performs well. But a fund with big AUM charging that much, I’ll avoid the fund.
    My comfort zone is 0.5-1.2 max for equity funds.

  4. A good practice is to mix actively managed fund with index low cost funds. This is why I have mixed Franklin feeder US opportunity fund, Parag long term equity fund, Mirae emerging blue-chip with Motilal Oswal SnP 500 and Nasdaq index fund and a nifty next 50 index fund.

  5. There are ways to earn equity like returns minus the volatility (8-12%) from a debt asset class which his unrelated to equity markets. You can look into:
    a. invoice discounting
    b. credit settlement financing
    c. crypto lending
    d. buy corporate bonds of sbi, hdfc, icici group instead of putting the money in their fd which gives you lower return.
    e. International Real estate crowd funding

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ETF can cause pain when one has a large qty in it and needs to sell it in a short time. Due to bids and offers in yeh market, one may have to sell at prices not desired. Any type of over supply when a person wants to sell can cause less realisation than what could’ve been realised without an head ache through a index fund


Could you please elaborate on Crypto lending?

How does Crypto lending Work?

Unless you have been living in the dark, dark cave of purely traditional finance, you have probably at least heard of crypto lending — the trend opening up opportunity for crypto players big and small, and is powering Ethereum’s decentralized finance ecosystem to over $1 billion in locked value.

At the core of crypto lending is a fairly simple concept: Borrowers are able to use their crypto assets as collateral to obtain a fiat or stablecoin loan, while lenders provide the assets required for the loan at an agreed-upon interest rate. This can also work in the reverse, where borrowers use fiat or stablecoins as collateral to borrow crypto assets.

You’ll likely notice that there is nothing groundbreaking here — they are simply collateralized loans — but credit and lending are powerful financial primitives that open up a wide range of applications and benefits for businesses, institutions, traders and users. Additionally, in the growing DeFi space, this primitive has been unlocked for permissionless, open and composable lending access.

Business model is simple:

  • People with crypto who want loan put their assets as collateral
  • For a 100 buck collateral they get around 50 loan (It’s called Loan to Value Ratio)
  • You provide the loan at 8-12%Interest rate
  • If the value of collateral drops or borrower refuse to pay collateral is sold and in either case you get money back.

Which are the best platform based on the criteria:

  • reputation
  • security
  • Interest

I compared multiple platforms and finally shortlisted these 2:

Celsius Network is a democratized interest income and lending platform accessible via a mobile app. Built on the belief that financial services should only do what is in the best interests of the community, Celsius is a modern platform where membership provides access to curated financial services that are not available through traditional financial institutions. Crypto holders can earn interest by transferring their coins to their Celsius Wallet and borrow USD against their crypto collateral . Interest on Loan account is 8.05% for stable coins and if you take the return in their native token cel it is 10.5% !

Very solid founding team run by Alex.He is one of the inventors of VOIP (Voice Over Internet Protocol) with a foundational patent dating back to 1994 and is now working on MOIP (Money Over Internet Protocol) technology. Over 35 patents have been issued to Alex, relating to exchanges, VOIP protocols, messaging and communication.

How it works?

Step 1) Register free using the link Celsius Network .App based hence download from mobile!

Step 2: Download the app and register ,KYC is super fast (Passport and selfie!)

The other Platform is Youholder :(12% Interest)

YouHodler FinTech platform is focused on crypto-backed lending with fiat (USD, EUR, CHF, GBP), crypto (BTC) and stablecoin loans (USDT, USDC, TUSD, PAX, PAXG), crypto/fiat and crypto/crypto conversions, as well as high-yield saving accounts. The platform supports BTC, BCH, BNB, ETH, LTC, XLM, XRP, DASH, HT, REP and other popular cryptocurrencies and tokens.

YouHodler is an EU and Swiss-based company with two main offices: Limassol, Cyprus and Lausanne, Switzerland.

Youholder is an active member of the Blockchain Association of Financial Commission and the Crypto Valley Association. Customers are protected by the independent Financial Commission’s efficient dispute resolution process.

Youholder provides a higher interest rate equivalent to 12% but it requires minimum investment of 1000 USD .
The loan to value of the collateral pool is also higher here,maybe around 65-70% as some borrower got for 90%LTV,hence slightly higher risk than celsius and higher returns. But nevertheless we can register and evaluate it.

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Let’s be real. Market has moved no where in last 3 years.Though Nifty has moved a bit there is severe polarization towards select few stocks. Markets have been expensive right after 2014 run up. One correction was pending but due to constant QE from US FED most of the money is flowing into markets inflating already expensive market. Unless there is severe correction we can’t expect decent returns.

QE is also real, so a correction may or may not happen soon (correction unrelated to the pandemic), and inflated prices may last long. There is merit to both sides of the argument about a correction and expensiveness. One could wait or nibble or invest full according to his plans. Time is equally sacred if not more sacred than capital and one cannot learn by simply watching from a safe distance. Spending real time in the market in any form is helpful I believe.

As with a lot of things in life, investing also is personal. If one does not know what he wants from the market, he will be swayed by the vagaries of the market. And one cannot take a concrete stance in the future unless one experiences everything the market throws at him in the present, irrational exuberance included. So one can know as much as he can, stick to what works for him, also be adaptive to new styles, keep evolving till the need dissipates.

Amateur and views are personal.

I am not saying to stay out of market but don’t expect any meaningful returns. Money is made when there is unprecedented bull market. We had great bull run in 2014 and 2017 and then sideways market. If there is no correction then there is no scope for bull market because everyone on the earth knows that markets are expensive and driven mostly by liquidity. EPS of nifty is struck at 400 for last 6 years! so we don’t have any growth and there seems to be no growth in the coming years as well. Liquidity alone cannot drive markets.

Money is made in different market conditions, not just in bull markets. Bears too make money, not just the bulls. If one goes by earnings alone, there should not be any bull markets at all, as they are not rational. Anticipation is as dangerous as greed, because expectations can go wrong but the collective wisdom or ignorance of the participants make such bull markets. Unfounded fear is less common as fear a lot of times is felt, if not visible. But greed is a state of mind, not necessarily based on facts. I am not talking about the desire to have a share in a profitable company or a company that has surprised the markets. I am talking about the pure greed that more often than not turns out to be ignorance when the tide turns.

A lot of things move the markets, QE is one among them, although more direct and powerful. One should acknowledge it, not ignore it. When will it end, what will be the repercussions are debatable. Populist policies will continue to exist even in developed world, particularly when elections are around the corner.

I do know that it will always be pigs that get slaughtered while FIIs, institutions, smart investors, experienced folks, system traders, all jump the ship with lights on and pigs like me get attracted to the colors, barge in and sink along with the ship :smile:

This is why I hate general mutual funds… and even diversifying among too many sectors in my own portfolio. Even in the worst bull run there are always sectors with tailwinds. It’s just about squeezing every drop from those sectors when it’s obvious that tailwinds are present. Right now I can’t see past Pharma/chem especially API sector. Will ride it for as long as possible without marrying any stock. Once the tailwinds die down il jump onto another sector and continue doing the same. My portfolio usually has 2 long term plays which make up more than 50 percent of my portfolio… these ie never touch and I benefit from decade long compounding. The balance 50 percent is purely Sector driven. That mitigates the risk of being stuck in a rut during long bear runs. Buying sector specific mutual funds may work in this regards too. But with so much info on the internet there’s almost no excuse anymore to do your own company research and build your own conviction

We don’t have inverse ETF to make money in bear markets. We had down market from 2011-2013 then we gad unprecedented bull in 2014. In short term yes market is irrational but in long term it always reflects underlying earnings. It is the money that invested during PE contraction phase that gives you superior returns ( I am not talking about inverse ETF or options or short selling)

Mutual funds work with certain constraints which we retail investors don’t have to. If someone has confidence and conviction why not but lets be honest majority retail investors always loose money because we enter when market is high and sell when market is low.

Also they follow idealistic paths like value invetsing and end up buying incompetent companies because they are cheap and get stuck in traps. Sad. The whole fancy of finding multibaggers.

Markets at the moment are looking at a good high position.
I was wondering is i could remove a certain amount of mutual fund profits and invest in ppf for a fixed return.
Saving from a few losses if the markets go down and eat up the profits while still continuing my sip
Or staying will still give me better profits than ppf in the long run ?

You should do according to your plan. So what was the plan? If you did not have any plan before investing, you could think of the possibilities and your reactions if you choose one possibility and act upon it.

If you think the market may fall and you may lose some profits, then it is better to sell some units and move the profits to PPF like you said. But would you feel sad or anger if markets rise after you sell? This is more of an emotional call than a financial one.

Or you could do this exercise, check the PF of your funds, check if the prices of the highest weighted stocks can sustain or not. If the stocks are in the current favored sectors, the upward momentum may continue and your funds’ NAV may rise for some more time.

Or if since the maximum you can invest in PPF is 1.5 lacs and if you can afford to lose this, stay put in your funds and take a chance, but then again if the markets fall in a couple of months, you should be able to look back and not get mad at not taking the sell decision.

Either we invest as per our plan or have the affordability to lose or have the emotional control if our decision turns out to be wrong.

If you are experiencing this for the first time, document your thoughts and emotions, write them down and then take a decision, so that after some time you can revisit the document and see how things went.