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What is expense ratio?
TER is an important parameter when one chooses a fund. Find out why?
Expense ratio represents the annual fund operating expenses of a scheme, expressed as a percentage of the fund‟s daily net assets. Operating expenses of a scheme include management fees, custody fees, registrar & transfer agent fees, investor communication related expenses, advertising related expenses etc.
An expense ratio of 1% per annum means that each year 1% of the fund‟s total assets will be used to cover expenses. Information on expense ratio that may be applicable to a scheme is mentioned in the offer document. Currently, in India, the expense ratio is fungible, i.e., there is no limit on any particular type of allowed expense as long as the total expense ratio is within the prescribed limit. For limits on expense ratio, refer to regulation 52 of the SEBI (Mutual Funds) Regulations, 1996.