Flipkart Co-Founder Sachin Bansal-Backed Navi Mutual Fund (Navi MF) has launched the Nifty Bank index fund, which will burden the ratio of total cost (TER) 0.12 percent.

Motilal Oswal MF is the only home of other funds that run the Nifty Bank index fund with 0.38 percent. So, this will make Navi Nifty Bank Index Fund the cheapest nifty index fund in the MF industry.

New fund offers (NFO) opened today (January 17) and will be closed on January 31.

Navi MF previously launched the cheapest nifty index funds and the cheapest 50 nexty next fund.

Dana Vs ETFS Index

The passive-managed banking sector scheme offered by the Fund Houses is in the form of exchange trade funds (ETF).

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

ETFs also have a low expenditure ratio, because these products are traded on the stock exchange, but there are also other expenses such as intermediary costs involved. However, if you invest through a discount broker, you can stay away from the cost of brokers for shipping-based transactions.

You need a Demat account to transact at ETF, while you don’t need it for index funds. Most of the Demat account charges RS 300-450 per year. For investors or active traders, sometimes, these costs are released.

Another difference is that you can start a systematic investment plan (SIPS) in index funds, but it is not possible with ETF.

However, keep in mind that finally the passive fund performance needs to be assessed how well the underlying index tracking is. So, be careful with a sharp tracking error vis-a-vis underlying index.