Does the expense ratio at the time of purchase in a fund apply for the entire period I am invested in a fund or does the expense ratio change even while I am invested in it? Secondly, is the 1-year return of the fund indicated after accounting for the expense ratio factor? Thirdly, is the capital gains I make to be calculated with the effect of the expense ratio factor?
-P K Sarkar
One, the expense ratio is a recurring expense and can change even after your sign up for a scheme. For information on the current expense ratio, you can check the monthly fact sheet of the fund or check on www.valueresearchonline.com, which is regularly updated. SEBI (the Securities & Exchange Board of India) stipulates the maximum expense ratios that schemes can charge.
Two, all MF returns are calculated on the NAV after accounting for the expense ratio. Expenses are deducted from your fund on daily basis before calculating the NAV. Three, the capital gains you make are also after already adjusting expenses. The returns you see on the NAV are the returns you realise as an investor.
This article was originally published on May 26, 2017.
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