Do you invest in a mutual fund? Have you started systematic investment plan (SIP)? If you have, a lot has changed for your mutual fund this year starting from—slash in expense ratio, re-categorisation of schemes and ban in commission and distribution fees. If you are wondering how these regulatory changes impacts you, here is how:
Drop in expense ratio
In September, the regulator Securities and Exchange Board of India (Sebi) slashed total expense ratio (TER) for all mutual funds. In case of open-ended equity schemes, TER was slashed from 1.75%-2.5% to 1.05%-2.25% across assets under managements (AUMS). In case of debt funds, the TER was cut to 0.8%-2% from 1.50%-2.25%. The slabs have also been revised this year for expense ratio. For index funds and exchange traded funds, the TER was reduced to a maximum of 1% from 1.5%. Within the closeended funds, TER for equity-oriented schemes will be a maximum of 1.25% and for other than equity oriented schemes will be a maximum of 1%. Expense ratio is the annual fee that fund houses charge for managing your money. All the fund houses incur a cost for managing mutual funds.
