Money word, in plain English ← Back to all terms
Expense ratio
The yearly fee a mutual fund charges, shown as a percentage of the money you hold.
Example. A 1% expense ratio on ₹1,00,000 costs about ₹1,000 over a year.
The expense ratio covers fund management, administration and distribution costs. You never pay it as a separate bill. It is deducted before the NAV is declared, so the return you see is already net of it. Small differences matter enormously over long periods, because the fee compounds against you exactly as returns compound for you. Over thirty years, one extra percentage point a year can cost lakhs.
One money lesson, in your inbox
A short, plain money lesson built from real news. Free. Unsubscribe anytime.
We will never spam you or sell your details.