Pricing Policy of Mutual Fund
The price of mutual fund products is inextricably linked with returns. Indian mutual funds follow the historic pricing structure. SEBI (Mutual Funds) Regulations, 1996, contain guidelines about the pricing of units. As per these guidelines, the schemes may also provide for the price at which the units may be subscribed or sold to the independent participants in the scheme and the price at which such units may at any time be repurchased by the mutual funds. Mutual funds are also to publish the sale and repurchase prices at least once in a week. Mutual funds are also to ensure that the difference between the sale and repurchase prices does not exceed 7 per cent of the sale price.
In India the face value of the units of most of the mutual funds is Rs 10. However, while deciding on the price, incentives, brokerage charges and commissions are also to be decided in advance because the expenses towards these items will effect the ultimate returns to investors.
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