The legendary mutual fund always insisted on bringing down the costs of fund management for the simple reason that any savings on costs by the mutual fund scheme that you have pit your money in would add to the corpus. And, in the long run, this could make a substantial difference to the total corpus you accumulate compared to what you would have got if the costs were higher.
The result of such a logic was the launch of exchange traded funds, popularly known as exchange traded funds (ETF's), although lately other types of ETF's have also been launched in the market with varied degrees of success.
ETF's are usually passively managed funds, meaning these funds track some benchmark index or the price of some physical or financial assets and, unlike regular mutual funds, do not try to outperform their benchmark index by regularly buying selling the portfolio of stocks.
So, naturally ETF's come with much lower costs compared to actively managed ones. Supporters of the active funds management style often say that good fund managers can beat the market and give you higher returns, but the fact of the matter is at times even the best of the fund managers also underperform the market. One of the best things about ETF's is that if you are invested in an ETF, you would get a return that is on par with the market.
The chance of you being disappointed with your returns in comparison with the market returns is very low, according to an official at a domestic house.
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