What are the charges that I should keep in mind while investing in mutual funds?
Some of the key mutual fund investment charges are:
Entry Load: It is charged when you enter into a mutual fund scheme for the first time.
Exit Load: It is charged when you redeem your mutual fund units.
Expense ratio: It is charged annually by a fund house for the management of a mutual fund scheme.
Transaction Charges: You'll only face this charge once when you invest. For investments of Rs. 10,000 or more, there might be a transaction fee of Rs. 100 to Rs. 150. This fee also applies to SIP investments over Rs. 10,000. Investments under Rs. 10,000 don't have a transaction fee.
Why do fund houses charge investors?
Mutual funds are run by experts called fund managers who work for these houses. They're supported by experts in capital markets and finance. Managing big investments requires loads of experience, expertise, and passion. So, fund houses have mutual fund charges for their services as mutual fund fees, which are approved by SEBI.
This fee covers various expenses like advisory, operations, management, legal stuff, and more. All these expenses together make up the total expense ratio (TER), which is the fee a mutual fund scheme charges to manage your money. It's usually a percentage of your investment, and it's deducted from the NAV (Net Asset Value), which is what you see as your investment value.
SEBI says that as the fund's assets grow, the TER should come down, and vice ver
How is the Total Expense Ratio Calculated?
To find the Total Expense Ratio (TER) of a mutual fund, you use this formula:
TER = (Total expenses during a period ÷ Total net assets of the fund) x 100.
Always look for all these charges before selecting any mutual fund.
