Mutual Funds have quickly become investors’ favorite investment instruments. Their returns, diversification, and professional account management are the key factors that have attracted young and seasoned investors alike.
However, there is one crucial aspect that is the key to making successful investments- transparency. It allows investors to understand the instrument, study its performance, and make an informed investment decision.
Thus, before you start investing through a mutual fund app, ensure transparency using the tips discussed in this blog.
Mutual Fund Fee Structures Explained
Before investing in any mutual fund, you must understand the applicable charges.
1. Transaction Charges
These charges are applicable for MF investments above ₹10,000, including investments in SIP. For such investments, typically ₹100 to ₹150 is charged. However, if your investment is lower than ₹10,000, these charges do not apply to you.
2. Expense Ratio
This is an annual fee, also known as a Mutual Fund fee, and is charged as a percentage of your fund’s daily net assets. It generally covers all the expenses incurred by the AMCs, such as distribution, administration, marketing costs, fees for fund managers, etc.
3. Exit Load
This is charged in case of premature withdrawal and is set to help the fund managers keep track of the withdrawal volumes. Typically, 1% of the redemption value is charged if you withdraw units within the first year of investment. There is generally no exit load charged after one year unless otherwise specified by the fund.
4. Entry Load
This is the fee charged when you invest in mutual funds for the first time. This fee covers the distribution costs for the Asset Management Companies (AMCs) to promote the MF scheme. However, as per the SEBI guidelines, AMCs cannot charge you with any entry load now.
Disclosure of Returns
Every AMC is regulated by the regulatory body – the Securities and Exchange Board of India (SEBI). They set tight guidelines to ensure that you and the AMCs are involved in a fair and transparent deal. To foster this, AMCs are required to submit a timely report that discusses the performance of the mutual fund scheme.
According to SEBI guidelines, fund houses are responsible for providing you with accurate reports and updates that contain detailed information about holdings, performance, and expenses.
The aim is to provide transparency, enabling investors to make informed decisions about their investments.
Comparing Apps
Here are some key points for comparing transparency in mutual fund apps and choosing the best one in the market:
- Ensure that the app provides features like tracking tools and technical indicators to help you track the performance in real-time.
- Ensure that the app complies with all the guidelines set by SEBI and is registered with the body as well.
- The app must give you detailed information about the fee structure upfront and explain it to you for better understanding.
- It must offer reliable and responsive customer service to address all your investment-related concerns.
- The AMC apps must provide you with timely return reports to help you track and understand the returns generated.
Conclusion
Investing in mutual fund schemes is rewarding and often increases your chance of earning more returns on investment. These can be invested through mutual fund apps where you can buy and sell your assets. However, you must choose the right app that gives you the best features and maintains transparency. Make use of the tips discussed in this blog and choose the best app to invest in mutual funds online.
