Series V-AMediumRisk, Return and Performance

The Total Expense Ratio (TER) of a mutual fund scheme represents:

AThe one-time entry load charged to investors
BThe commission paid to the distributor only
CThe exit load charged on redemption
DThe annual recurring costs of managing the scheme expressed as a percentage of daily net assetscheck_circle

Correct answer

D. The annual recurring costs of managing the scheme expressed as a percentage of daily net assets

lightbulbDetailed Solution

TER is the annual percentage of a scheme's average daily net assets used to meet recurring expenses — investment management fees, registrar and custodian charges, marketing and distribution costs, etc. SEBI caps the TER on a slab basis by scheme size; a higher TER directly lowers investor returns.

Reference: NISM Series V-A Mutual Fund Distributors, Chapter 6.

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