Q. I am 24 and have just started my career. Budget 2023 has announced the new Mahila Samman Savings Certificate. Will this benefit me?
The Mahila Samman Savings Certificate (MSSC) was introduced in the recent Union Budget for 2023-24. The scheme's goal is to encourage women to participate in the financial system by providing them with a safe and secure investment option. This new financial tool seeks to promote financial inclusion and women empowerment.
Under this programme, women may invest up to ₹2 lakhs for a maximum of 2 years in their own name or in the name of a girl child. It offers an interest rate of 7.5% p.a. The beneficiary may make partial withdrawals any time before maturity. The two-year term of the MSSC is from April 2023 to March 2025.
The scheme is backed by the government of India, making it a safe and secure investment option for women.
Read more: Women in Budget 2023: Government takes steps to empower women economically
How to invest?
- Visit the nearest bank or post office offering this scheme and get the Mahila Samman Bachat Patra Yojana form.
- Fill out the application form by providing the necessary personal, financial and nomination details.
- Submit the form with the required documents, such as proof of identity and address.
- Choose the amount of deposit and make the deposit through cash or cheque.
- Receive your Mahila Samman Savings Certificate.
Q. How does a mutual fund charge its annual maintenance fee? Does it reflect in the NAV? Can we calculate it from the statement we receive? Other than this fee, are there other charges that an investor should know?
Mutual funds typically deduct their annual maintenance fee, known as TER (Total Expense Ratio) daily from the fund's assets. The TER is the annual fee that fund charges to investors to cover the operating costs for running the fund. It is expressed as a percentage of the fund's assets and is deducted from the fund's NAV (net asset value). NAV refers to the per-unit price of a mutual fund.
The TER includes costs such as management fees, administrative expenses, and other operational costs. The expense ratio is an important factor to consider when choosing a fund because it can have a significant impact on the fund's performance and overall returns.
Let's say there are two funds, Fund A and Fund B. If the portfolio of both funds is same but the TER of Fund A is higher than Fund B, then Fund A will generate lower returns than Fund B. Remember, TER is deducted from NAV, hence Fund A's NAV will grow lower than Fund B.
TER is denominated in percentage % (calculated annually) by the fund houses. Let's take our previous example, Fund A's TER is 2.0% while Fund B's TER is 1.5%. It means that Fund A's annual charges for managing your investments is 2.0% of market value of your investment. If the market value of your investment is ₹10 Lakhs in both schemes, then annual charges for Fund A will be ( ₹10,00,000 x 2%) = ₹20,000 while for Fund B it will be ₹15,000.
Other charges
Apart from the TER, investors should be aware of other charges such as exit load or redemption charges. Mutual fund companies charge you exit load only if you redeem your investment within a certain time frame after purchase.
Let's say the exit load of Fund A is 1% if you redeem your investment within 12 months from the date of purchase. You decide to redeem ₹2 Lakhs out of your investment of ₹10 Lakhs after 3 months of your investment.
In this case, the applicable exit load will be ₹2,00,000 x 1% = ₹2,000. This exit load will be deducted from your ₹2 Lakhs of redemption amount, and you will receive ₹1,98,000 from the fund house.
The number and type of fees can vary from fund to fund. So, it is prudent to review the fund's prospectus and other information material to understand all the fees that may apply to your investment.
Investors can view the TER on the website of the Association of Mutual Funds of India (AMFI), or on the offer document of the scheme.
International Money Matters Pvt Ltd is a 20-year-old SEBI registered financial planning-cum-investment advisory boutique. Please click here to find out more.
