How to calculate net returns for a mutual fund investment?

[gotoumesh]

The FMC Charges are deducted every day. So for example if annual expense ratio is 2%, 2/365 = 0.54794 basis points of NAV will be charged every day.

Thank you,
clear with FMC,
but yet not clear on how to arrive exactly number of units left with me on any particular day. In addition to FMC there may be several other charges. Is there any single value/ratio/percentage which I can simple deduct and arrive at my result?

Other query , In general the lower the expense ratio the better the fund is. Does expense ratio include all charges/fees?

 

[gotoumesh]

Have you purchase your MFs via DIRECT or via a Broker. May be you are getting charged by the broker

I have few MFs purchased through Broker and some directly (with out enty load).
Does "exit load" is waived off if we purchase directly?

 

[nikrod]

pls explain it in detail thnx in adavance

Lets take an example. Suppose you have invested Rs. 1 lakh in a fund which has an annual expense ratio of 2%. That means it would charge Rs. 2000 for entire year (I have assumed that fund NAV remains same). So for 365 days in a year the charge would be 2000 / 365 = 5.4794 Rs. per day. That comes out to be 0.0054794%. Now one basis point is one hundredth of 1%. So the figure becomes 0.54794 basis points per day.

 

[nikrod]

Thank you,
clear with FMC,
but yet not clear on how to arrive exactly number of units left with me on any particular day. In addition to FMC there may be several other charges. Is there any single value/ratio/percentage which I can simple deduct and arrive at my result?

Other query , In general the lower the expense ratio the better the fund is. Does expense ratio include all charges/fees?

As far as I know, Fund expense ration includes all marketing charges, fund's expenses, trail commissions and other misceleneous charges incurred by fund or employees working for AMC.

 

[AW10]

Lets take an example. Suppose you have invested Rs. 1 lakh in a fund which has an annual expense ratio of 2%. That means it would charge Rs. 2000 for entire year (I have assumed that fund NAV remains same). So for 365 days in a year the charge would be 2000 / 365 = 5.4794 Rs. per day. That comes out to be 0.0054794%. Now one basis point is one hundredth of 1%. So the figure becomes 0.54794 basis points per day.

Nikrod, I have not checked in fund's prospectus, but to me it seems logical that they charge this expense on periodic basis (quarterly or yearly) to long term holders. and to short term holders as a part of exit load.

Maybe the accounting appraoch for expense charging is given in their prospectus in small print.

 

[rajivnc]

Lets take an example. Suppose you have invested Rs. 1 lakh in a fund which has an annual expense ratio of 2%. That means it would charge Rs. 2000 for entire year (I have assumed that fund NAV remains same). So for 365 days in a year the charge would be 2000 / 365 = 5.4794 Rs. per day. That comes out to be 0.0054794%. Now one basis point is one hundredth of 1%. So the figure becomes 0.54794 basis points per day.

Ideally the user should not get a feel of reduction in the number of units. The fund house expense will be adjusted only in the NAV and not in the number of units right..?

Also the fund house will charge the exit load ONLY if we redeem the units before 1 years right..?

 

[nikrod]

Nikrod, I have not checked in fund's prospectus, but to me it seems logical that they charge this expense on periodic basis (quarterly or yearly) to long term holders. and to short term holders as a part of exit load.

Maybe the accounting appraoch for expense charging is given in their prospectus in small print.

Until recently fund houses used to charge variable expenses per day and make sure that sum was equal to expenses per year. This was beneficial to some institutional investors wherein, for the days they invested in such schemes, lower expenses were charged. This was part of the mal-practice by AMC's. SEBI has recently barred this and manf=dated fund houses to charge unit holder uniformly (every day). Logically speaking, if AMC's charge expenses on quarterly basis, some big players would churn their money in less than 3 months in order to avoid these expenses. Also some corporates make investments for periods as short as 3-4 days. That is why AMCX's charge expenses on daily basis.

SEBI also mandated one more rule regarding exit loads few months back. Earlier the money from exit loads was used for fund expenses. Now AMC's have to add that money to funds net assets and add it to NAV accordingly.

I don't know about prospectus's. Maybe they print the infi in small font someplace where people surely would not look.