How do expense ratios work

Written by. Bankrate senior reporter James F. Royal, Ph. Edited By Brian Beers. Edited by. Brian Beers. Brian Beers is the senior wealth editor at Bankrate. He oversees editorial coverage of banking, investing, the economy and all things money. Reviewed by. Kenneth Chavis IV. Share this page. Bankrate Logo Why you can trust Bankrate. Bankrate Logo Editorial Integrity. Key Principles We value your trust. Bankrate Logo Insurance Disclosure. Definition: What is an expense ratio? How expense ratios work An expense ratio is the cost of owning a mutual fund or exchange-traded fund ETF.

Read more From James. About our review board. You may also like Mutual fund vs. Getting Started. Planning for Retirement. Retired: What Now? Personal Finance. Credit Cards. About Us. Who Is the Motley Fool? Fool Podcasts. New Ventures. Search Search:. Updated: Jul 8, at PM. The Motley Fool. Join Stock Advisor Discounted offers are only available to new members. As per these regulations, the total expense ratio TER allowed is 2. The limit for debt funds is 2. On top of this, the Securities and Exchange Board of India allows all the mutual funds to charge 30 basis points more as an incentive to penetrate in smaller towns B15 Cities.

These cities also enjoy an additional 20 basis points as exit load charges. For example, if you invest Rs. Mutual fund expense ratios range from 0. Example : 1. If the fund handles Rs. Though the expense ratio is important, it is not the only criteria while selecting a mutual fund scheme. A scheme with a consistently decent track record may tell you differently about the TER.

Sometimes, the higher expense ratio can overshadow the decent returns. You can invest in hand-picked funds by our in-house experts in a hassle-free and paperless manner. Start investing now or. Promotion None no promotion available at this time. Expense ratios are just one fee investors pay. Frequently asked questions What is the expense ratio formula?

Are expense ratios charged every year? Which mutual fund has the lowest expense ratio? More about investment fees. On a similar note Dive even deeper in Investing. Explore Investing. Get more smart money moves — straight to your inbox. Sign up. NerdWallet rating NerdWallet's ratings are determined by our editorial team. The scoring formula for online brokers and robo-advisors takes into account over 15 factors, including account fees and minimums, investment choices, customer support and mobile app capabilities.