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Queries at Moneylife Foundation's Mutual Fund Helpline
Significance of Expense Ratios
When we say that Fund X has returned 20% in a year—is that return based on the difference in NAV? If it is based on NAV, and since expense ratio is deducted on a daily basis from the net assets, is it right to say that the returns are exclusive of the expense ratio? So, if expense ratio is 2%, my return is still 20% and not 18%? In that case, if Fund A has post-expense return 20%, expense ratio 2% and Fund B has post-expense return 20%, expense ratio 4%, can an investor choose either fund and get the same return?
MLF’s Reply: Mutual fund returns are calculated based on their NAVs which are post-expenses. Therefore, it is right to say that the returns are after factoring in expenses.
If 20% is your return calculated on the basis of the percentage difference in NAV, this is your actual return. Please note, an exit-load may be charged as per the terms for your scheme.
Please note also that expense ratio does affect returns. In the hypothetical scenario taken, schemes with different expense ratios were delivering the same returns. However, the actual return (pre-expense) of Fund A is 22% and for Fund B is 24%.
The fund manager of Fund B would have picked better stocks; hence, better returns even after the high expense ratio.
Will the fund manager of Fund B always perform? This is cannot be predicted. If, over the next one year, both the fund managers deliver a pre-expense ratio return of 18%, the returns of Fund A after the expense ratio would be 16% and that of Fund B would be 14%. In this scenario, Fund A outperforms.
Therefore, expense ratios need to be considered, among other factors, such as consistency in performance, portfolio composition and benchmark related performance, etc.
It may not always be true that the fund manager of a scheme with a higher expense ratio will be able to significantly outperform a scheme with a low expense ratio. 
Distributor Commisisons
When I invest through a financial advisor, how much commission does the advisor get at the first investment and thereafter regularly. For example, on dividend payouts or at any other time?
MLF’s Reply:  Distributors of mutual fund products are paid two types of commissions: upfront commissions and trail commissions. Some fund houses pay only upfront or only trail or a mix of upfront and trail commissions. Systematic investment plans have a different commission structure.
Upfront commissions are paid on fresh investments that come into a scheme. Therefore, if the distributor brings in an investment of Rs1 lakh and the fund house pays an upfront commission of 2%, the distributor will earn Rs2,000.
Trail commission is an annual commission which is paid on the value of existing investments that the distributor has brought into a scheme. Trail commissions are calculated on a daily basis as a percentage of the assets under management of the distributor and payable monthly. Therefore, the total value investments in the scheme is around Rs1 lakh and fund pays a trail commission of 0.25% per annum, the distributor will earn Rs250.
The commissions are not fixed. The exact commissions paid may vary, depending on what is negotiated between the distributor and the asset management company.
However, you need not worry about the commissions earned by your distributor. The fund house charges you a fixed annual fee or expense ratio which has a limit as per SEBI (Securities and Exchange Board of India) regulations. Whatever the distributor gets is included in this ratio. You would need to check on the website of the fund house for the exact expense ratio charged. It is important to look for a lower expense ratio along with other selection parameters.
(Have a Mutual Fund Query? Try  Moneylife Foundation’s Mutual Fund Helpline. Submit your query here)


Minerals For All, another MLM, offering single remedy for all diseases!
Minerals For All is yet another MLM hard selling ‘concentrated mineral water products’ as the single remedy for all diseases and promises high returns to its marketing agents. Only issue is the water it claimes to procure from the US is just the saltiest water
Minerals For All (MFA), a multi-level marketing (MLM) company is luring people with the fanciful claim of fostering India's biggest health revolution through the use of 'concentrated mineral water' allegedly collected from the 'Salt Lake of Utah' in the US. Making such a claim falls foul of the Drugs & Magic Remedies Act, however, since it ensnares people through the MLM route with high incentives to agents, it has managed to fly below the radar of most regulators. 
The products are sold by mfadirect.com, owned by Itspossbile Marketing Ltd, a New Delhi-based marketing firm. Like all MLMs, its sale of products is combined with the 'promised' lucrative income opportunities through distributorship, franchise and direct marketing options. It offers 10% to 30% commissions (as mentioned on its website) exciting prices, preferred customer rewards and bonus for building marketing network.
The website claims that US-based Mineral Resources International (MRI) manufactures these products and mines mineral water from the 'Salt Lake of Utah'. Itspossible Marketing claims to be an exclusive distributor of these products.
MFA’s website mineralsforall.com also promotes products from another website called mfadirect.com and provides details on how one can join, become a member and start earning. 
A simple reading of the site makes the MLM pitch very clear. It says, “We feel that nature has given us amazing simple ways to fulfil nutrition needs let us lead a healthy life and our product range offers natural products with simple rationale but excellent results. Therefore we want to reach out to as many households as possible and offer them our product to achieve a better health; considering this fact we want to spread our reach not only to all major four metros but will dig into tier one, tier two cities and also to remote villages with an aggressive expansion plan. If you have entrepreneur zeal our business model will give wings to your business ambitions, contact us and one of our associate will explain you in details.”
Those who are tempted by its claims must also notice the fine print that absolves it of responsibility. It reads, “Company does not provide any guarantee of earnings neither it gives any money on recruitment of distributors. Incentives can only be earned by independent representatives/ distributors of the company by affecting the sales of products.”
The MLM claims that most diseases are due to mineral deficiency, which can be overcome by using its  'concentrated mineral water'  (Anderson's CMD also know as MRI CMD, Precious Waters, Elete Electrolyte) by adding it to water to cure major diseases like arthritis, cancer and diabetes.
In an email, Vipin Rohila, director and chief executive of MFA Marketing Pvt Ltd said, "Please note that the Company has clearly mentioned on all of its Marketing Brochures, website or packaging and label itself that 'Anderson’s CMD is not a drug. Not for medicinal use. No approved therapeutic claims'."

However, at the same time the company again tried to tell us, through the email, about the 'benefits' of their product. "Since our diet is nutritionally deficient therefore it is bound to be deficient in essential minerals and trace elements and since our product offers a natural composition of minerals found and prepared be Mother Nature in Great Salt Lake water, it helps replenish the deficiency of various minerals in today’s diet. Therefore it can be concluded that though we do not sell Anderson’s CMD as a medicine to cure one or more diseases but it has been observed that with regular usage some people have noticed benefits in their various health problems, which is a clear indication of improved general well being," Rohila added.

He also claimed that the company has received product approval from Food Safety and Standards Authority of India (FSSAI) as mineral supplement.
Now, let’s check some facts about the Great Salt Lake from where the company claims to source its products. The Great Salt Lake, located in the northern part of the US state of Utah, is the largest salt water lake in the Western Hemisphere. In an average year the lake covers an area of around 4,400 sq km but the lake's size fluctuates substantially due to its shallowness.
According to Wikipedia, the salinity of the lake's main basin, Gilbert Bay, is highly variable and depends on the lake's level; it ranges from 5 to 27% (50 to 270 parts per thousand). For comparison, the average salinity of the world ocean is 3.5% (35 parts per thousand) and 33.7% in the Dead Sea. The ionic composition is similar to seawater, much more so than the Dead Sea's water; compared to the ocean; Great Salt Lake's waters are slightly enriched in potassium and depleted in calcium.
 In short, there is no 'mineral water' in the Great Salt Lake, and its water is the most saltier than ocean. Same goes for mineral deposits as well. So be aware, there is no 'one shot' cure for any diseases by using the 'mineral water' from this lake as claimed by Minerals For All and its agents. 
Moneylife has written several articles on frauds that lure people by floating various MLM and frequently warned investors that “If it looks too good to be true, it usually is.” This is clearly another in the same category. Moneylife investigated this company when a worried reader wrote to ask us to investigate the company. 





2 years ago

You have always been in the forefront of bringing to light such shady companies.
All the best in your efforts.

Also look at http://www.Adooye.com which is again a MLM promising huge money in 140 days just for watching ads!!

please take up this company through your grinder and save gullible people from losing their hard earned money>

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