Cheapest index fund: Here's all you need to know

Sachin Bansal’s Navi Mutual Fund to launch cheapest index fund: Here's all you need to know

Navi Nifty50 Index Fund will have a total expense ratio (TER) of 0.06 percent in its direct plan

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Navi Mutual Fund (MF), backed by Flipkart co-founder Sachin Bansal, will soon launch the cheapest index fund -- Navi Nifty50 Index Fund.

Navi Nifty50 Index Fund will have a total expense ratio (TER) of 0.06 percent in its direct plan. The TER is a measure of the total costs associated with managing and operating an investment fund, such as a mutual fund. These costs consist primarily of management fees and additional expenses, such as trading fees, legal fees, auditor fees, and other operational expenses.

How will this benefit investors?

A fund with a low TER means an investor will be able to make slightly higher returns as he/she will have to bear a lower operational charge.

What are the other funds with low TER? 

ICICI Prudential Nifty Index Fund and ICICI Prudential Sensex Index Fund are the two cheapest funds in the industry at present, with a TER of 0.10 percent, according to data from ACE MF.

When will the new fund offer of the Navi Nifty50 Index Fund open?

The new fund offer (NFO) of Navi Nifty50 Index Fund will be open for subscription between July 3 and July 12, 2021.

What do experts say about funds with low TER?

Experts believe rushing to invest in a fund with low TER may not be the right move. “Wait and watch to see how the fund is doing, is it able to track the index without much variation? The size of the index fund also matters, as larger funds usually have more liquidity,” Ravi Kumar TV, founder of Gaining Ground Investment Managers, is quoted as saying in a report by Moneycontrol.

“It is likely to be more difficult for an index fund with a smaller asset base to closely track the index due to the impact of inflows and outflows and the cash component it holds,” said Amol Joshi, founder of Plan Rupee Investment Services.

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