Returns posted by fund houses are subject to audit

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Published: February 27, 2019 1:36:09 AM

Equity index funds invest in stocks by typically replicating a benchmark equity index such as the S&P BSE Sensex, Nifty, etc.

You can call up the respective AMC concerned and get your query resolved.

The returns posted by fund houses are subject to audit
– Is there any way to find out if the returns shown by my mutual fund house is correct as my statement shows one-year return of minus 7% and the website shows minus 5%.
—Gurmeet Singh
The returns posted by fund houses are subject to audit and it is unlikely that the returns are misstated. It may be that your holding period may be different than that for which the performance has been displayed or maybe you may be referring to a different plan (eg. Regular vs Direct plans). You can call up the respective AMC concerned and get your query resolved.

– Should I start investing in index funds as the markets are volatile?
—Ashok Gupta
Equity index funds invest in stocks by typically replicating a benchmark equity index such as the S&P BSE Sensex, Nifty, etc. They buy all the stocks which are in the benchmark index in the same proportion or weight. The objective being to provide a passive exposure to the index without taking any active calls in terms of either stock exposures or weightages. This strategy varies from an actively managed equity fund wherein a fund manager actively manages the portfolio by buying or selling stocks which might vary from those held in the index. Index funds are also subject to equity market related volatility which may be higher or lower than that of an actively managed fund. This would depend on the strategy adopted by the fund manager, number of stocks in the portfolio vis-à-vis the index. Since index funds are passively managed, the expense ratio tends to be lower than that of actively managed funds.

– Many of my friends reducing SIP amount because of the volatile markets and negative returns in the last one year. Should I also reduce my SIP amount?
—Gaurav Kumar
Since a retail investor does not have enough time and resources to diligently track the markets, Systematic Investment Plan (SIP) becomes a viable option that helps an investor avoid the risk of timing the markets and benefit from rupee cost averaging, i.e., buying more units when NAV is low and less units when NAV is high. Moreover, it helps one avoid behavioural pitfalls like buying more when everybody is buying or selling when everybody is selling (herd mentality). Hence, volatility in the markets should not be a reason to reduce the amount of SIP.

-The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to fepersonal finance@expressindia.com

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