The expense ratio tells you how much the fund house charges for managing your investment. It includes the commission paid to the distributor as well as other expenses incurred by the fund house. A higher expense ratio means more returns for the investor and vice versa. But that does not mean you should avoid a fund with a higher expense ratio. If it is generating superior returns as compared to its peers, then it is worth investing int.
NAV or Net Asset Value – Net Asset Value is the price of each unit in a mutual fund scheme, similar to the price of an equity share. NAV shows the performance of the mutual fund scheme and is based on the securities or stocks held in the scheme NAV changes daily.
Short term and long term capital gains & tax:
When you sell mutual funds you are liable to pay capital gains tax on the profit you make, that is on the amount earned over the price at which you purchased the mutual funds. In the case of equity funds, the capital gains tax is liable on gains over Rs 1 lakh. So, if your gains are Rs 1.5 lakh in a year, you will be liable to pay tax on Rs 50,000. The short-term capital gains tax, if sold before one year, is 15%. Long-term capital gains tax, if sold after one year, is 10%. In the case of debt funds, the short-term capital gains tax is applicable if you sell within three years. The applicable rate is your income tax slab rate. The long-term capital gains, i.e., if you sell after three years, is 20% after indexation. Indexation can help lower your tax impact as it links the purchase price to the inflation rate.