The expense ratio is the annual fee charged by a mutual fund to manage your investment. It covers costs such as fund management fees, administration, registrar services, and marketing. The ratio is expressed as a percentage of the fund’s daily net assets and is deducted from the NAV automatically, so it does not appear as a separate charge.
For example, if a scheme has an expense ratio of 1%, then 1% of your investment is deducted annually to cover these costs.
| Scenario | Explanation |
|---|---|
| You’re comparing two funds | A lower expense ratio may help maximise net returns, assuming similar performance. |
| You invest in direct plans | Direct plans exclude distributor commissions and usually have lower ratios. |
| You choose active management | Expect a higher ratio in exchange for potential outperformance. |
| You want to double-check the ratio | Refer to the AMC’s latest factsheet or official website for confirmation. |
Last updated: 17 Nov 2025