Swarup Mohanty, CEO of Mirae Asset Management is not a very big fan of tax breaks to propel an investment solution. For him, an investment solution comes on the basis of its merit and the possibility of wealth creation that it has to offer.
Mohanty featured on the latest episode of Winvesta Insights – the new season of podcasts of Winvesta. He also elaborated on why the ETF market in India has taken time to grow the way it has over the last five years. Assets Under Management (AUM) of Indian ETFs have risen 8x over the last five years to INR 4 Lakh Crore.
“The primary reason is that India is still a great market for alpha generation. The shift to ETFs happens when the alpha generation ability of the market starts to diminish. We are on that cusp. While we still have a lot of talent in India which can generate alpha, the list is definitely shrinking,” he said.
Here are 10 key takeaways from that interaction:
- You need a Demat account to buy ETFs unlike Mutual Funds
- The higher the tracking error, the higher is the inefficiency of the fund to replicate the index in the correct manner
- The cost of the ETF is lower than a mutual fund. But that should not be the deciding factor to invest in it.
- ETFs are cost-efficient but fund houses will bring their own ideas for an ETF and there will be a price for that ideation.
- India is still a market with great alpha generation opportunities
- The switch to ETFs happens when the alpha generation ability of the market starts to diminish
- There is no cause of concern for existing overseas investors but new purchases will have to wait for some time.
- For a first-time investor, the ideal way to invest is through the ETF route as the person will take time to understand the working of the market
- Your goal should determine when to exit your holdings, not the market
- One should not wait for a tax break to make an investment decision
To listen to the entire episode, click here. The Winvesta Insights Podcast is available on multiple platforms like Apple Podcasts, Google Podcasts, Spotify, Anchor, Radio Public, Breaker, among others.