SIP or Systematic Investment Plan is a great investment option that allows you to invest in market securities in a safe and disciplined manner. Your earnings from SIPs are high, as the interest rate ranges between 12% and 15% and goes up to 21%. SIPs allow you to regularly invest in small amounts as they offer you more flexibility and are ideal for conservative investors. However, there are still certain charges that you have to pay over and above your investment amount.
Take a look at what these charges are:
Exit load
SIPs are a popular investment option mainly because they offer high liquidity, along with high returns. This means that you can withdraw from your SIP as and when you wish to. However, when you liquidate your SIPs, you need to pay a charge known as an exit load. This charge is a one-time fee and is expressed as a percentage of your total gains from the SIP. You only have to pay this charge if you exit the SIP prematurely. This means withdrawing from the SIP before the lapse of the holding period that the fund house has defined.
Transaction charges
This is another one-time fee that you need to pay if your investment in SIPs is over Rs. 10,000 at any given time. This charge amounts to Rs. 100 and is deducted in four consecutive instalments. You have to pay transaction charges along with your 2nd, 3rd, 4th and 5th instalments.
Expense ratio
Expense ratio in mutual funds is a measure of the total annual costs associated with managing and operating a mutual fund, expressed as a percentage of the fund's average assets under management (AUM). It includes various fees and expenses incurred in running the fund, such as management fees, administrative expenses, distribution fees (if any), and other operational costs. The expense ratio is deducted from the fund's returns before they are distributed to investors.
