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Guide to Mutual Funds

Expenses Charged on Mutual Funds

Usually, mutual funds involve several fees and charges that investors should be aware of before making investment decisions. 

Mutual fund charges  can have an impact directly or indirectly on the returns earned by investors and can vary depending on the type of mutual fund and the fund house. 

In this section we will discuss mutual fund expenses associated with mutual fund investments. These expenses are divided into two categories.

Important Charges Associated with Mutual Fund Investments

  • Transaction Charges: Transaction charges are paid when you buy and sell units with a total value above a specific limit. In India, if you buy or sell mutual fund units of ₹10,000 or more, you will be liable to pay transaction charges. As per SEBI (Securities and Exchange Board of India), this charge is levied as shown in the table below:

  • Entry Load: It is the fee paid by investors when they make their first investment in a mutual fund scheme. Before 2009, this charge varied for each fund house in India. However, as per SEBI Mutual Fund Regulations, no entry load can be levied for any mutual fund scheme.

  • Exit Load: Exit Load is a penalty for early redemptions intended to prevent investors from selling their Mutual Fund shares too soon. It is charged as a percentage and applied to the redemption amount. 

Suppose the exit load is 2%. If you sell your investment before the maturity period, you'll receive 98% of your redemption amount. Let's understand with an example.

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  • Total Expense Ratio: The expense ratio is an annual charge measured as a proportion of a fund's daily net assets. It is charged by an asset management company for managing an MF scheme. Under Regulation 52 of SEBI Mutual Fund Regulation, the TER limit has been revised as follows: 

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