Cool Title, but what’s the news?
In a first-ever move, markets regulator SEBI has issued new norms to cap total expenses for investment in Mutual Funds at 2.25 per cent, bringing in a much needed overhaul to the fee structure that mutual funds charge from investors.
Okay, but what does it mean?
Known as Total Expense Ratio (TER), it is the fee that Mutual Funds collect from investors, every year, to manage their money. It is a percentage of a scheme’s corpus that a MF house charges towards expenses, including administrative and management. Introduced in 1996, it had remained constant up until this point, and the move comes in the wake of a proposal, SEBI cleared earlier this September.
Why should I care?
Effective from April 2019, the straightaway benefit that you, as an investor, will get is the reduced annual charges you need to pay to the Mutual Funds. And this is how the new charges will look like,
The maximum TER for closed-ended equity schemes is at 1.25 per cent, and other equity schemes at 1 per cent.
The maximum TER for open-ended equity schemes will be 2.25 per cent, and 2 per cent for other open-ended schemes.