If you are looking for low cost index funds to invest, then there is better news for you. Tomorrow on 3rd July a new fund offer is coming with very low expense ratio. Flipkart co-founder Sachin Bansal’s Navi Mutual Fund has launched Navi Nifty 50 Index Fund with the lowest expense ratio. Its NFO (New Fund Offer) will open on July 3 and will be open for subscription till July 12. Navi Mutual Fund is a part of Sachin Bansals BFSI. Navi Nifty 50 Index Fund is an open ended scheme which is the lowest cost in the category of passive fund as compared to other index schemes and as per the released press release it is just 0.06 per cent. In comparison, other index funds are charging expenses ranging from 0.15 per cent to 0.20 per cent. The investment objective of this scheme is to get returns equal to Nifty 50 index by investing in stocks of companies included in Nifty 50 index subject to tracking error.
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Real gains to investors from reduction in expense ratio
The launch of this low-cost index fund comes at a time when many AMCs are rapidly increasing their expense ratios. According to Saurabh Jain, MD & CEO, Navi AMC Ltd. With an index fund, investors do not need to pay much to gain expertise in selecting stocks. Real gains to investors can be made by reducing the expense ratio while providing them with the same quality professional portfolio management services through index funds. According to Jain, Navi has reduced the cost under the direct plan proposal to 0.06 per cent, which is currently the lowest in the category of index schemes.
What is NFO
Whenever an Asset Management Company (AMC) launches a new fund, it is open only for a few days. Its purpose is to buy shares for the fund portfolio and hence to raise money through it. In a way, money is raised to start a new fund. This whole process is called New Fund Offer. In many ways it looks like an IPO but it is not like that. According to the current rules, the period of NFO in India ranges from 3 to 15 days.