Recurring Expenses

Recurring Expenses

Recurring expenses, also known as expense ratio or ongoing charges, are the fees charged by mutual fund companies for managing and administering the fund. These fees are deducted from the fund’s assets and are expressed as a percentage of the fund’s net asset value (NAV). Recurring expenses are an important factor to consider when investing in mutual funds because they can significantly impact the returns on your investment.

Recurring expenses cover various costs such as investment management fees, legal and auditing fees, marketing and advertising expenses, and administrative expenses. These expenses are ongoing and are deducted from the fund’s assets on an annual basis. They are calculated as a percentage of the fund’s net asset value, which means that the higher the fund’s assets under management, the higher the recurring expenses.

Investors should carefully consider recurring expenses before investing in mutual funds. While they may seem small, they can add up over time and eat into your investment returns. It is important to compare the recurring expenses of different funds to determine which one offers the best value for your money. Additionally, investors should look for funds with low recurring expenses that provide consistent returns over the long term.

As the name suggests, these are day to day operation costs of a scheme. These expenses among other things include.

  • Investment management and advisory fees,
  • Trustee fees
  • Registrar’s fees
  • Custodian’s fees
  • Audit fees
  • Marketing and selling expenses (agents’ commission etc.)

The recurring expenses that can be charged to the scheme are subject to following limits (as a percentage of weekly average net assets).

First Rs 100 crores > 2.50%

Next Rs 300 crores > 2.25%

Next Rs 300 crores > 2.00%

Balance > 1.75

In case of schemes other than equity oriented ones, the above limits are less by 0.25%. For Fund of Funds Scheme, the recurring expenses limit is 0.75%.


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