By Admin 
Mutual Funds are considered a smart and convenient option of investment, where your money is managed by expert fund managers. But do you know that some charges are also deducted from the amount you invested, which can affect your final return? It is not only necessary to understand these charges before investing, but also part of a better financial planning.
How does fund management happen?
When you invest in mutual funds, your money is assigned to the Asset Management Company (AMC). This company appoints a fund manager for the scheme, which with the help of an expert team analyzes the market and puts your money in different shares, bonds or other investment options. The entire process costs the cost, which AMC charges different types of fees from investors to complete it.
1. Entry Load
This is the fee that was earlier charged from investors while buying a unit of mutual funds. But the good news is that the Securities and Exchange Board of India (SEBI) has completely abolished the entry load on equity mutual funds in 2009. That is, now you do not have to pay any fee at the time of entering the fund.
2. Exit Load (Exit Load)
If you sell the mutual fund units before the scheduled time or redeem, then you may have to give exit load. This fee is levied by the Fund House so that investors remain invested for a long time. It changes on the basis of the scheme and can usually range from 0.25 percent to 4 percent.
3. Management Fee or Expense Ratio (Expense Ratio)
This is the most important fee that cannot be ignored. AMC charges this fee for the services of the fund manager and his team. It is called an expense ratio, which is a fixed percentage of the total investment amount on an annual basis. This fee is properly deducted every day by your total holding.
4. Account Fees
Some AMC also charges account fees from investors, especially when investors do not maintain minimum balance or SIP amount. This fee is reduced directly from the portfolio of the investor, so it is necessary to know and track it.
5. Service and distribution charges
AMC is also spent in works like marketing of its services, printing of documents, mailing etc. To make up for these expenses, service and distribution charges are levied.
6. Switch Fees
If you want to switch from one fund to another, then in some schemes you may have to pay switch fees. However, many schemes also provide this service free, so it is necessary to read its conditions before choosing the scheme.
It is important to understand every aspect
Before investing in mutual funds, not only returns, but also the charges associated with it should also be understood well. These fees affect your investment and with the correct information you can choose a better scheme. Read the scheme documents and fund factheets carefully before investing, so that you can decide more intelligently.
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