these expenses are charged under one head called the total expense ratio (TER); an annual charge on AUM in percentage terms. Capital market regulator Sebi has capped this expense ratio at 2.5% and it comes down as the AUM increases. Thus, it is beneficial to invest in funds having higher corpus. MF investments are also subject to a one-time charge in form of loads. Though entry loads are banned by Sebi, investors should take note of exit loads as certain funds come with heavy exit loads for early redemption.
To know about the industry benchmark, you can look at the average expense ratio charged by funds. Funds with expense ratios lower than the industry average should be considered. However, different categories of funds have different expense ratios. For example, passively managed funds like index funds or ETFs have lower expense ratio than actively managed funds.
Are returns from gold exchange-traded funds tax-exempt?
— Suryadhar Rao
Returns from gold ETFs are not tax-exempt. Gains from gold ETFs will have tax treatment similar to debt MFs. Thus, when an investor redeems units of gold ETFs held for more than a year, he is subject to long-term capital gains tax of 10% without indexation or 20% with indexation, whichever is lower. If the period of holding is less than a year, the short-term capital gains will be clubbed with the income of the investor, to be taxed as per the applicable tax slab.
The writer is senior investment analyst, Morningstar India
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