Mutual fund investments offer high returns, but do come attached with charges and fees that are known as TER or Total Expense Ratio. The asset management company with whom you start an investment levies them at different stages of your investment. Here are important charges and fees to consider before you invest in mutual funds.
This is the amount the fund houses charge from you basis your investment. Levied once a year, these charges translate as a fee the fund houses take in return to the services they offer. Earlier this was subject to fluctuation and altered as per the discretion of the fund house, but now with SEBI intervening, this has been capped at 2.25% of your investment.
Many fund houses raise a 1% commission on your final asset value at the time of mutual fund redemption. The final asset value is a hefty sum as it is the total of capital gains and your investment.
Entry And Exit load
While entry load has been discontinued, exit load is levied by AMCs when an investor redeem funds prematurely. Exit load is not fixed for all the funds and is levied to discourage investor from redeeming funds prematurely.
Apart from these charges, you are likely to incur smaller one-time charges related to your initial transactions, demat account opening charges, and may have to pay a security transaction tax also. So, do the math and take an informed decision when you invest.
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