Mutual Fund Investment becomes more attractive with the proposal to reduce expense ratio

The recent decision by SEBI (Securities Exchange Board of India) to make changes in the Mutual Fund Expense ratio is going to be extremely beneficial for the investors and this for sure would attract more investors who would thus be able to draw more profit than before.

A surge of almost 2000 crore rupees in profit is expected if the decisions of SEBI are put in action. Investors who choose for long term plans such as the SIP model would be the ones to benefit the maximum as they will be able to draw the maximum profit.

The new model that came in power from this month completely rejects the earlier slab based system that was used for calculating the expense ratio that has been in use since 1996. The new model proposes a new style of cost analysis that would create a huge surplus of money that can be allocated towards profit. A renowned value research firm says that the latest expense ratios calculated had shown an enormous difference of around 2000 crore rupees and the same can be expected if the plan is properly implemented. The total amount drawn by the whole mutual fund industry as expense cost was 27,000 crores and once the new implementation put in place, it will be reduced to 25,000 crores .A total reduction of 2000 crores.

This for sure would make investments, especially long term investments more attractive and beneficial.

Praveen Vikkath