Invest money in mutual funds? So know these new rules of SEBI, they will have a direct impact on you.

News India Live, Digital Desk: If you are also among those crores of people who invest in Mutual Funds to increase their hard-earned money, then this news is very important for you. SEBI (Securities and Exchange Board of India), the market controlling body, has recently implemented some new rules which can have a direct impact on your investment.

This change is especially important to know for those who invest money in small-cap and mid-cap funds. Let us understand in very simple language what has changed and what you need to do.

1. Why were new investments banned in some funds?

You might have heard that some mutual fund companies have temporarily stopped taking new money into their small-cap and mid-cap funds through lumpsum or SIP.

Why did this happen? In fact, for some time now, money was coming in very fast in the shares of small and mid-cap i.e. small and medium companies. When the demand for something suddenly increases, its price also increases wildly. SEBI felt that due to this, a ‘bubble’ might be created in the market, which would burst later and cause huge losses to the investors. To protect investors from this huge risk, SEBI has asked fund houses to stop new investments if they receive excess money.

How will this affect you? If you are already investing in these funds, then you do not need to panic. This step has been taken only for your safety. Yes, you will not be able to invest new money in these funds right now.

2. What does ‘stress test’ mean?

SEBI has now made it mandatory for all small-cap and mid-cap funds to conduct ‘stress test’ every 15 days.

What is this stress test? This is a kind of ‘fire drill’. SEBI wants to know that if there is a sudden big fall in the market and a lot of investors come together to withdraw their money, will the fund manager be able to return the money to everyone without any hassle? This test shows how many days it will take for the fund manager to sell 25% or 50% of his portfolio. This information will now be given to you every month.

What benefit do you get from this? This will increase transparency. You will know how prepared the fund in which your money is invested is for difficult times.

3. Changed expenditure rules (TER)

TER means ‘Total Expense Ratio’. This is the annual fee that the mutual fund company charges you for handling your money. SEBI has now made some changes in the method of collecting this fee so that it is more beneficial for investors.

What should investors do now?

There is no need to panic after seeing these changes. SEBI has taken all these steps only to protect the interests of investors. As a smart investor, all you need to do is:

• Keep information: Keep an eye on news related to your mutual fund.
• Don’t panic sell: Small fluctuations keep coming in the market. Do not sell your investments just because of changes in rules.
• Talk to your advisor: If you have any doubts, the best option is to talk to your financial advisor.

These rules are an attempt to make the market more secure and transparent, which will prove beneficial for you in the long run.