If direct mf is free from commission then why is the expense ratio shown when i try to see a fund, for eg. in Kotak select focus fund the expense ratio is mentioned as 1.00, it should be zero. Similarly in all other funds expense ratio is mentioned, in some, it is over 2.00. I am unable to understand, please clarify.
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There is an expense involved in managing the fund - for example the fund manager and his teams salary, rent, infrastructure, IT, and various other charges. AMCs recover this money from the investors from the amount they invest with the AMC. In addition to these fixed charges, AMC also shares a commission with the distributors who distribute these funds on behalf of AMC.
AMC bundles both these costs as “Expense Cost”…and this is usually expressed as a ratio, hence called “Expense ratio”.
You can look at it this way - Expense Cost = Fund Management Cost + Distributor commission
But when you buy the fund directly from a AMC via a platform like Coin, there is no Distributor Commission, so naturally the expense cost reduces. This implies you save a higher amount of money.
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