Glossary· Costs & scheme terms
What is Expense ratio?
Also known as TER, Total Expense Ratio
The fund's annual running cost, as a percentage of assets.
Already deducted from NAV — you never see a bill, and every return figure here is net of it. It is the one number about a fund that is known in advance and compounds against you, which is why it carries 20% of the star rating.
For the formula and the constants behind this figure, see Methodology.
Guides that use Expense ratio
31 guides put this term to work.
- How do mutual funds actually make money?The three doors return arrives through — appreciation, income, realised gains — and why all of them land in the NAV, net of costs you never see billed.
- Active vs passive: can a human beat the market?The accounting identity that starts the argument, what SPIVA India shows about large caps, why persistence is the problem — and where active earns its fee.
- Direct vs Regular plans: how a commission you never see costs you lakhsThe same scheme, the same portfolio, two different NAVs — and a trail commission deducted before the NAV is struck. What the gap compounds to over twenty years.
- Exit load and expense ratio: the hidden costs of investingThe expense ratio split into three parts from April 2026, the caps that apply, the charges outside it — and why one percentage point can outweigh the principal.
- How to read a mutual fund factsheet like a proRead it backwards: mandate and benchmark, then holdings and concentration, then cost, then risk — and only then returns. Four minutes, in the right order.
- Index funds and ETFs: low-cost passive investing explainedWhat the Indian evidence says about active large-cap funds, tracking error versus tracking difference, and where indexing stops winning automatically.
- Fund of funds: what happens when a mutual fund buys mutual funds?Two expense layers and, usually, non-equity taxation with a 24-month clock. Where the wrapper earns its place, and where you pay twice for convenience.
- Overnight, liquid or ultra-short: where near-term cash actually belongsThree adjacent debt categories separated by one variable — how many days until you need the money. Why last year's return is the wrong test.
- Money market to long duration: the rest of the debt fund ladderMost debt categories are one variable cut into bands: lending duration. Walk the rungs, match the band to your horizon, and note the floaters off it.
- Target maturity funds: a bond ladder wrapped as an index fundA fixed maturity date is the whole design: hold to it and you get roughly the yield you bought at, whatever rates did. Sell early and that is gone.
- SGB vs gold ETF, now that new sovereign gold bond issuance has stoppedThe SGB won on a coupon no other gold wrapper pays and an exemption on maturity. What existing holders should do, and what is left to buy today.
- Core and satellite: how to build a portfolio you can actually maintainEvery holding is either reliable or interesting, most of the money is in the reliable part, and the interesting part has a size limit set in advance.
- Decoding alpha and beta: manager skill versus market riskBeta is how much market you took; alpha is what you got beyond it; R² says whether either number means anything. Read in order, they catch a closet indexer.
- Tracking error and standard deviation in passive fundsOne measures how much a fund moves, the other how much it moves differently from its index — and neither is the number that actually reaches your returns.
- What is portfolio turnover ratio? Decoding a fund’s trading activityHow much trading it took to produce the returns, the invisible costs that come with it, and why the number is a consistency check rather than a verdict.
- Credit risk and yield-to-maturity in debt fundsA high YTM describes the risk taken, not the return you will earn. How to read it beside the rating profile, and what a credit event permanently does.
- Factor investing and smart beta: beyond market-cap weightingA disclosed, rules-based tilt at a fraction of active cost — and active risk by another name, with long underperformance that is the reason the premium exists.
- Focused funds: is holding only 30 stocks conviction or recklessness?The stock cap is a multiplier on the manager's process, not a strategy — it widens the distribution of outcomes without raising the expected return.
- Dynamic bond funds: letting a manager call the interest-rate cycleYou are not buying a duration, you are buying a forecast — of the one variable the bond market has already priced. Why choosing duration yourself usually wins.
- Arbitrage funds: equity taxation on a trade with no market direction in itBoth legs hedged, so the risk is short-term-debt-like — but the equity-oriented label taxes gains at 20% and 12.5% where a liquid fund pays slab.
- Quant funds: a rules-based manager, not a SEBI categoryAn actively managed fund whose stock picking runs on a usually undisclosed model, priced like active management. It relocates the trust rather than removing it.
- How SEBI's rules actually protect a retail investorThe structural protections, the conduct rules and the safety nets — and the more useful half: an explicit list of what none of it protects you from.
- Teaching children about money through mutual fundsA ₹2,000 loss at fourteen teaches what no explanation can. What to teach at each age, and the minor-folio rules that surprise families at eighteen.
- Your annual portfolio audit: a step-by-step health checkNinety minutes, once a year, in six parts — where the default action at every step is to do nothing, because the audit exists to catch drift, not to trade.
- Blockchain and tokenisation: the future of fund record-keepingThe Indian record is already electronic and reconciled — so what is actually being attacked is the cost of intermediaries agreeing on it.
- AMC apps vs third-party platforms: where should you invest?The route matters far less than the plan. A 'free' platform selling Regular plans is paid through the expense ratio you pay daily.
- AIFs, PMS and mutual funds: what the ₹1 crore actually buysNot a premium version of mutual funds — a different perimeter where you trade liquidity, transparency and tax treatment for access to assets funds cannot hold.
- Thirty years back, thirty years ahead: how Indian funds evolvedNearly every protection you rely on exists because something failed. Which incident produced which rule, and what is likely, uncertain and unlikely next.
- What trading actually costs: beyond zero brokerageSTT, exchange charges, GST, stamp duty and DP fees stack on every trade and no broker can waive them. The break-even move, and what leverage really multiplies.
- The NPS decoded: two tiers, four asset classes, one compulsory annuityTier I is the only part that matters. The 75% equity cap that limits its upside, and the 40% annuity floor at 60 that rises to 80% if you leave early.
- NPS or mutual funds for retirement? The honest comparisonFunds win on equity exposure, liquidity and the exit; the NPS wins on cost and a deduction no fund offers. Your tax regime decides whether it exists.
More on costs & scheme terms
What you pay, and the rules attached to buying and selling units.
- Direct vs Regular plan
- The same portfolio, sold with or without distributor commission built in.
- Growth vs IDCW option
- Whether gains stay invested or get paid out.
- Exit load
- A fee charged when you redeem within a stated period.
- Lock-in
- A period in which units cannot be redeemed at all.
- Stamp duty
- A flat 0.005% government levy on every mutual fund purchase.
- Minimum SIP / lumpsum
- The smallest instalment and the smallest one-time amount the scheme accepts.
- NFO
- A scheme's initial subscription window, before it starts trading.