Sachin Bansal-backed Navi Mutual Fund launches Bank Index Fund today

Navi MF continues its focus on low-cost passive products. Earlier, it launched cheapest Nifty Index Fund and cheapest Nifty Next 50 Fund.

Flipkart co-founder Sachin Bansal-backed Navi Mutual Fund (Navi MF) has launched the Nifty Bank Index Fund, which will charge total expense ratio (TER) of 0.12 percent.

Motilal Oswal MF is the only other fund house running a Nifty Bank Index Fund with a TER of 0.38 percent. So, this would make Navi Nifty Bank Index Fund the cheapest Nifty Bank Index Fund in the MF industry.

The new fund offer (NFO) opens today (January 17) and will close on January 31.

Navi MF earlier launched the cheapest Nifty Index Fund and the cheapest Nifty Next 50 Fund.

Index funds vs ETFs

Most passively-managed banking sector schemes offered by fund houses are in the form of exchange traded funds (ETFs).

Also read: Here are the top 10 financial services stocks held by mutual funds: Do you own any?

One of the differences between ETFs and index funds is that ETFs give buy and sell prices to investors throughout the day (i.e. during market trading hours 9.15am to 3.30pm), while investors can only buy and sell index funds at end of the day NAVs.

ETFs also have low expense ratios, as these products are traded on exchanges, but there are also other expenses like brokerage fees involved. However, if you are investing through a discount broker you can get away from brokerage fees for delivery-based transactions.

You need a demat account for transacting in an ETF, while you don't need one for index funds. Most demat accounts charge Rs 300-450 per annum. For active investors or traders, sometimes, these charges are waived off.

Another difference is that you can start systematic investment plans (SIPs) in an index fund, but it is not possible with an ETF.

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