IDBI opened up its NFO for the IDBI Nifty Index fund today. This is a passive index mutual fund, which means that the fund manager will not try to actively manage returns, but rather invest in stocks in a proportion that resembles the S&P CNX Nifty, and then track the Nifty as closely as possible.
There is a growth and dividend option under this scheme, and the default option is growth. So, if you don’t specify that you want the dividend plan, then your investment will be treated as if it was under the growth plan.
Minimum Investment in the IDBI Nifty Index Fund
For the NFO – the minimum investment is Rs.5,000, and for systematic investment plans, it is as follows:
- Rs. 1000 for a minimum period of six months
- Rs. 500 for at least 12 months
- Rs. 1500 per quarter for at least 4 quarters.
Expense Ratio of the IDBI Nifty Index Fund
I have stressed the importance of expenses paid on mutual funds and ETFs several times, so I was naturally curious to know what the expenses of this fund is going to be, and how they compare to other index mutual funds in the same category. This index fund will charge recurring expenses up to 1.5% of weekly average net assets, which is just slightly higher than what comparable funds offer. There are other funds from Franklin and HDFC (among others) that incur lower expenses. When you think about a index mutual fund – expenses are key because the composition of two funds tracking the same index should be quite similar, and the returns should also be similar.
The only difference should be due to how they manage their cash, and expenses. And lower the expenses – the better it is for you.
This new fund offer will close on the 31st May, and will re-open on the 30th June, so if you invest in the NFO – you should keep the 30th June date in mind because that is when the fund will re-open, and you can track it using a portfolio tool.