Stock market Investing directly in is a risky job. If you cannot take the risk of investing directly into the stock market, then you can use mutual funds. If you do not have a large amount, then you can also put small amounts in mutual funds every month as SIP. Asset management companies (AMC) manage your investment in mutual funds. For each mutual fund scheme, AMC appoints a fund manager, which helps a team of market experts and financial analysts. To meet the expenses of these professionals, AMC charges some charges from investors, which are important to understand before investing. These fees are as follows:
Entry load
This fee is charged when you buy a unit of a mutual fund scheme for the first time.
Exit load
This fee is applied when you sell or redeem your mutual fund units. This fee is not certain and may vary to different schemes. Usually it can range from 0.25% to 4%, which depends on which type of scheme you have invested and how long you are extracting your units. Its main objective is to encourage investors to remain invested for long term.
Management fee
This fee is paid to the fund manager and his team to manage your scheme.
Account fee
If you fail to maintain the minimum balance required in your account, AMC can sometimes charge this fee. It is directly cut from your investment portfolio.
Service and distribution charge
These fees are charged by AMC to cover expenses like printing, mailing and marketing.
Switch fee
If a mutual fund scheme allows you to convert your investment from one scheme to another, then the AMC can charge a switch fee for this service.
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