Understanding the Truth About Mutual Fund Fees: Udayan Adhye

If you invest your money on mutual fund, then it's crucial to know the truth about mutual fund fees and how it affects your returns. In this article, we will explore the truth about mutual fund fees and their impact, using the insights of finance expert Udayan Adhye, and with the example of Parag Parikh Flexicap Fund.

Let's consider a hypothetical scenario: If you had invested Rs. 1 lakh in the portfolio of Parag Parikh Flexicap Fund 10 years ago, you will expect this to increase significantly over time. However, in reality, the growth might not meet your initial expectations. here's why.

This is because, the Parag Parikh Flexicap Fund has an expense ratio of 0.56% per year. This expense ratio used to pay salaries and manage the fund, among many other things. Now, in my opinion, that is a very small fee to pay for the ease & expertise that mutual funds offer.

For example, if we look at the actual growth of investment over the past decade, instead of reaching Rs 6.4 lakh, it has increased to Rs 6.14 lakh.

Despite the presence of fees, mutual funds offer many benefits, including professional management, diversification, and convenience. As Udayan Adhye emphasizes, the fees paid for these services can be considered a worthwhile investment, especially for those who do not have the expertise or time to manage their investments.

Moreover, Adhye highlights the role of mutual fund distributors. If you had invested through a mutual fund distributor, your expense ratio would have been around 1.32% per year. While higher, if a distributor actually helps you in managing your money, this can be a completely worthwhile cost!

View this post on Instagram

A post shared by Udayan Adhye | Finance & Investing (@udayanonmoney)

In conclusion, the decision to invest directly or through a distributor depends on your personal preferences. While direct investing may offer lower fees, working with a knowledgeable advisor can provide peace of mind and potentially better investment results in the long run. But according to Udayan Adhye, he strongly believes that almost everyone who's unsure about how to invest should work with a good mutual fund distributor or a SEBI registered investment advisor.