What a fund costs
The expense ratio, how it is taken, how a yearly cost adds up, and the other charges a fund can carry.
This explains how things work. It is not advice about what to buy, sell or hold.
The expense ratio
A fund's running costs (managing the money, administration, registrar and custodian fees, distribution and the like) are added up and stated as a yearly percentage of its assets: the total Expense ratio (TER). SEBI sets the maximum, in regulation 52 of its mutual fund rules, and within that total a fund may spend on any allowed kind of cost.
Taken every day, not billed
No bill arrives. A sliver of the yearly cost is taken from the fund's assets every day, so a 1% yearly ratio means about a 365th of 1% each day. The NAV (net asset value) published each evening is already net of it, which is why the cost never appears as a separate line.
How a yearly cost adds up
A cost is taken whatever the year brings, and what is taken no longer grows. Suppose ₹1,00,000 earns 10% a year before costs for twenty years. With a 1% yearly cost it grows at about 9% and ends near ₹5.60 lakh; with a 2% cost it grows at about 8% and ends near ₹4.66 lakh. The arithmetic is only an illustration of compounding, not a forecast of any fund.
Other charges
SEBI abolished entry loads, so no load is charged on buying, though a distributor may deduct a small transaction charge from a large purchase, as the scheme's documents state. A scheme may charge an exit load: a percentage of the NAV deducted from the proceeds when units are redeemed within a period it states, such as 1% within 90 days. The scheme information document sets out its loads.
On this site
Each fund page shows the total expense ratio from AMFI's monthly list and, beside it, the fund's own charge, the base expense ratio. AMFI's total adds the brokerage, transaction costs and statutory levies a fund pays to trade, so a fund that trades constantly, such as an arbitrage fund, can show a total several times its own charge. The Peers section ranks the total within the category, where funds trade alike. The guide to Direct and Regular plans explains why the same scheme has two ratios.
Sources
- SEBI www.sebi.gov.in/sebi_data/faqfiles/sep-2024/1727242783639.pdf checked 02 Oct 2026
- AMFI www.amfiindia.com/investor/knowledge-center-info?zoneName=expenseRatio checked 02 Oct 2026
- Zerodha Varsity zerodha.com/varsity/chapter/mutual-fund-expense-ratio-direct-and-regular-plans/ checked 02 Oct 2026