Mutual funds are a way for investment, initiated by investors or shareholders to invest in stocks, bonds and others. These are then managed by professional money managers who structurally manage everything. However, mutual funds are not as simple as they seem. There are many charges involved in mutual funds as well. The impact of charges on mutual fund returns is many. Some of them are stated below.
- One time charges:
One time charges refer to charges incurred only once; they are of three types: First is the entry load, where the charges are made when the stocks or bonds are first purchased. After this, the mutual funds sell these stocks at a higher price. Second is the exit load where the mutual funds repurchase the stocks at a lower price than NAV. Charges are also applied while buying back the funds. The third one is the transaction charges that are applied when the money is invested in mutual funds. There is a particular amount above which these charges are applied and is paid to the distributors who are selling the funds. - Recurring charges:
Recurring charges are the charges that are applied on specific mutual funds, and it is stated that mutual funds cannot deduct more than the amount given by the regulator. These are deducted on a daily basis by Mutual funds.
These were the two most common and essential charges of the mutual funds. Though mutual funds are risky, if invested properly, then one can enjoy a great deal of profit as well. Mutual fund investments are on the rise because of their beneficial properties.
