Please let me know how much does a mutual fund deduct as expenses and how much is actually invested in shares. For example, if I invest Rs 1,00,000 in some fund (directly to avoid entry load and assume that there is no exit load) which invests 3 per cent in Tata power shares, will Rs 3,000 of mine be invested for Tata Power shares?
Vikranth
Besides entry and exit load, asset management company also charge expense which can be a maximum of 2.25 per cent for equity funds every year on the total money invested. This fee is deducted proportionately every day from the NAV. The component of the total management fee includes the investment advisory fee to the AMC and operating expense like fee of custodian, registrar and auditors and marketing and distribution expense. The management fee does not include brokerage paid in buying securities.
In your quoted example, if we ignore the entry and exit loads and assume that you make an investment of Rs 1 lakh in a fund. After deducting the expense ratio on annual basis, the rest will be invested in the fund and the exposure of your money in a particular stock will be the same as shown in the fund's portfolio.
This article was originally published on January 01, 2009.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
