Understanding Expense Ratio in Mutual Funds

What is the expense ratio in mutual funds?

The Expense Ratio denotes the annual operating expenses of a mutual fund scheme as a percentage of its daily net assets. It covers the costs associated with the fund's management, administration, advertising, and other operational expenses. If a scheme has an expense ratio of 1%, it implies that 1% of the fund's total assets are used each year to cover its expenses. It is essential to note that a higher expense ratio can reduce the overall returns of an investor. The monthly factsheets published on the Asset Management Company’s (AMC) website provide the expense ratio for each scheme.

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