Change In TER: Small Step, Big Impact!

There is a sense of deja-vu among many stakeholders of the domestic mutual fund industry after the market regulator, Securities and Exchange Board of India (SEBI), capped the expenses of mutual funds and linked them to the assets under management (AUMs). Almost nine years ago, when SEBI had banned the entry load, doomsayers had predicted the end of the mutual fund industry in India. Nine years down the line, mutual fund industry has emerged stronger than ever. The growth in mutual fund industry has been phenomenal. Since year 2009, the domestic AUMs have witnessed an annual growth of 17%. It has increased from around Rs5 lakh crore to Rs25 lakh crore. 

What has helped such growth is the regulator's active pro-investor approach that has brought in regulations that have helped investor to earn more, which has ultimately attracted more and more investors. The current reduction in the maximum expense ratio that a mutual fund scheme can charge to the investors will also give boost to the growth of mutual fund investors in India. 

Besides, it will also weed out various malpractices that has seeped into the mutual fund distribution. Almost a decade back, the ban of the entry load was introduced to address the issue of misselling and churning, where agents would advise investors to keep switching schemes frequently just to earn more commissions, even when this did not suit an investor's risk-return profile. 

Our cover story this time explains in detail how to map your returns to frontline indices. Sensex and Nifty have performed better than many funds in recent times. This is a cause for concern and frustration for many investors as their portfolios are still in the red year-to-date. Therefore, they want to know how to get returns given by Sensex and Nifty. Hope our cover story will answer your questions.