How expense ratio eats into your mutual fund gains

We recently received a question from one of our readers (we urge all of you to share your names) asking how an expense ratio is charged on mutual funds. Before we answer that question, let's understand what an expense ratio is and how it impacts your mutual fund investments. What is a mutual fund's expense ratio? In simple words, it's an annual fee that fund houses charge their investors. It consists of their annual operating costs, which include management fees, administration fees and even advertising and promotion expenses, among others. It is important to note that while the expense ratio is an annual fee, it is not charged once every year. Instead, it is subtly deducted daily from the mutual fund's net asset value (NAV). Since the

This article was originally published on May 29, 2023, and last updated on September 06, 2024.