Funds charge annual management charges which are a recurring expense. In addition, investors have to pay the entry load. Why are there no 4- or 5-star funds available for investing via a SIP without entry load?
-Koshy
Where the recurring management expenses are concerned, the fund deducts it before arriving at the NAV. An entry or exit load has nothing to do with these recurring management expenses. These loads are charged to an investor for the marketing and distribution expenses incurred by the fund.
There are two 4- star rated funds that do not charge an entry load on SIP investments: Birla Asset Allocation Aggressive and HDFC Index Sensex Plus. However, if you sell your units within two years from the date of allotment, then the applicable entry load which was waived will be levied.
The only fund house that does not charge an entry load on SIPs is Quantum Mutual Fund. But they too have a heavy exit load on redemptions. Depending on when the redemption is made after buying the units, a load of 4 per cent (before 180 days), 3 per cent (181-365 days), 2 per cent (366-540 days) and 1 per cent (541- 730 days) is levied.
This article was originally published on August 03, 2007.
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