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Fees and Charges in Investing in Mutual Funds
Expense Ratio
This includes all charges such as operating expenses, management fees, fund management charges etc.
Normally, mutual fund expense ratios are within the range of 0.5% to 1.0%. However, in some cases, expense ratios can exceed 2.5%.
STT
STT stands for Securities Transaction Tax. It is a government-levied tax on securities sales. Investors pay the cost, which AMC deducts at redemption.
The Government (Ministry of Finance) imposes 0.001% STT on buying/selling equity or hybrid funds.
Entry Load
An entry load is a fee charged by some mutual funds when you make an initial investment or purchase additional units. This fee is a percentage of the amount invested and is deducted from your investment before it is used to buy units of the fund.
For example, if you invest ₹10,000 in a mutual fund with a 2% entry load, ₹200 will be taken as a fee, and the remaining ₹9,800 will be invested.
Entry loads are meant to cover the costs associated with processing the investment. However, as of 2009, entry loads have been banned in India, so new mutual fund investments do not have this charge.
Exit Load
When selling mutual funds before the end of the first year (under 365 days), generally, a 1% exit load is charged for equity and hybrid schemes. Liquid funds, Low duration and Ultra short-term debt funds have 0 exit loads.
| Fund | If redeemed within…. | Exit load |
|---|---|---|
| Mirae Asset Liquid Fund | 1 day | 0.0070% |
| 2 days | 0.0065% | |
| 3 days | 0.0060% | |
| 4 days | 0.0055% | |
| 5 days | 0.0045% | |
| 6 days | 0.0040% | |
| HDFC Balanced Advantage Fund | 365 days (units in excess of 15% of the investment amount) | 1% |
| ICICI Pru All seasons bond fund | 30-31 days | 0.25% |
| ABSL Frontline equity fund | 90 days | 1% |
Conclusion
Understanding the costs associated with investing in mutual funds is essential for making informed decisions and maximizing your returns.
At Mutualfundwala, we provide clear insights and expert guidance to help you navigate these costs and choose investments that align with your financial goals.
If you have questions about mutual fund fees or need assistance in evaluating the cost-effectiveness of your investments, our team is here to support you.
Contact MutualFundWala today for personalized solution and ensure that your investment strategy is both cost-efficient and successful!
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