Q. Which one of the statements is correct with respect to Total Expense Ratio (TER)?

[A] It is a sales charge or fee that investors pay when purchasing shares of a mutual fund.

[B] It is a fee charged by some mutual funds for distribution and marketing expenses.

[C] These are the costs associated with buying and selling securities within the fund portfolio.

[D] It is a financial metric that represents the total costs associated with managing and operating an investment fund.

Answer: D
Notes:

Explanation – The total expense ratio (TER) is a measure of the total costs associated with managing and operating an investment fund, such as a mutual fund. It consists of management fees, trading fee, legal fee etc. It is a measure of a fund’s operational efficiency. Investors pay attention to the expense ratio to understand if a fund is an appropriate investment for them after fees are considered. The higher the expense ratio, the lower are the returns on the investment.

Source: Forum IAS

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