A father’s basic financial toolkit

Middle class Indian fathers used to be distant, authoritarian and usually dictatorial. They ran the extended household with an iron fist keeping a tight hold on expenses. The middle class pre-independence Indian father struggled to meet the needs of an extended family with meagre income and prospects. The fight for economic survival translated into the immovable patriarch image. Economic growth has changed not just fortunes of families but also the equations within the home. Smaller, nuclear families, better economic prospects, and more money has meant a larger role for the father within the home. From changing nappies, to school pick and drop duties, to doctor visits, the dads are a part of bringing up the baby. However, in most households, for a variety of reasons, the one thing that has remained largely constant is the control of the finances.

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Move over NPS, ETFs will eat your lunch

ICICI Prudential Mutual Fund’s new fund offer (NFO) of Bharat 22 exchange traded fund (ETF) is in the market this week seeking investor money for the government’s disinvestment programme. Looking through the document, I was struck with the expense ratio of this fund. At 0.0095% per year, this is the cheapest ETF in the market today. Understand what this cost means first. The expense ratio describes the price you pay for the facility of handing your money over to a fund manager and it is charged on your funds under management. For example, a Rs10 lakh corpus, with an expense ratio of 1%, will cost you Rs10,000 a year. You don’t have to cut a cheque for this cost since it is taken by the fund house out of your corpus—that’s why it is called net asset value, it is ‘net’ of costs. Expense ratios have a big impact on investor returns over a lifetime of investing. At 0.0095%, Bharat 22 will cost you Rs95 a year. Reliance AMC’s CPSE ETF (the first government disinvestment fund) costs 0.07% or Rs700 a year. A 2% managed fund expense ratio costs you Rs20,000 a year.

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