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Let Your Money Work For You

Let Your Money Work For You
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Friday, June 11, 2010

Does your investment get whithered away?

Expenses take away a lot of money out of your investments. This particularly affects the rate of return of your debt funds because they normally earn less compared to their equity counterparts. Look at the table below:
Beginning Invested (Rs)Year EndEarning (Rs)Yr.End (Rs)Expense Ratio Year EndExpenses (Rs)


110,00010%100011,0001%110


210,8909%980.111,8701%118.701


311,75112%1410.16813,1621%131.6157


413,030-1%-130.312,9001%128.9965



The 4 year ended investment gave you 6.3% pa and not 27.7% as you may be

tempted to believe. The expense ratio applies irrespective of the kind of growth

achieved.








Beginning Net Investment (Rs)Simple Rate of ReturnGM
110,8901.089NA
211,7511.175141.084039
313,0301.3029951.09223
412,7711.2770661.063049


























































































































You will get a clear idea on this as you follow this link


Even if the market give a negative rate of return, the fund or PMS manager will charge you the expenses as per law. So eventually you may have corpus diluted if the fund is not doing well.


Periodic review of the fund performance is as important as periodic review of external conditions affecting the investments.



Recently SEBI modified the rules of applying expenses. The change in valuation norms for short term debt will also add to volatility.

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