Costs associated with investing in mutual funds

The fund value is calculated as per the Net Asset Value (NAV), which is the net of expenses on every unit of the fund. This is calculated after every business day by the AMC.

AMCs will charge you an annual fee, which covers their salaries, brokerage, advertising and administrative expenses. As a thumb rule, the larger the fund size, the less will be the annual fee.

AMCs may also charge loads, which are basically sales charges incurred by the company in the form of distribution costs.

If you are unfamiliar with associated charges, you might get into a position where the profits from your investment are reduced considerably due to overhead expenses. So, it's a good habit to read the fine print for details on expenses and fees related to a mutual fund.