SEBI Cuts MF Expense Ratios: Don't Rush to Switch, Focus on Performance

• SEBI reduced mutual fund expense ratios by 10-20 basis points across various fund categories, including equity, debt, index funds, and ETFs, aiming to lower investor costs.
• The new Base Expense Ratio (BER) simplifies cost disclosures, separating core expenses from taxes and statutory charges.
• While seemingly small, the expense ratio cut can significantly boost long-term returns due to compounding; a 20-basis-point cut can add Rs 2.95 lakh to a Rs 10 lakh investment over 20 years.
• Experts advise against switching funds solely for marginal cost savings, emphasizing that fund performance, strategy, and consistency are more critical than minor fee differences.
• Switching funds incurs practical costs like capital gains tax and exit loads, and should only be considered if the existing fund underperforms, no longer aligns with goals, or a new fund offers substantial, net cost savings.

Why It Matters: Use SEBI's expense ratio cut for better cost monitoring, not as a trigger for impulsive fund switching.