Expense Ratio Calculator

Index Funds: 0.05-0.25% (Nifty 50, Sensex index funds). Actively Managed Equity: 0.5-1.5% (direct plan), 1.5-2.5% (regular plan). Debt Funds: 0.2-0.8% (direct), 1-1.5% (regular). International Funds: 0.5-1% (direct), 1.5-2% (regular). Rule of thumb: AVOID equity funds with greater than 1% expense ratio in direct plans or greater than 2% in regular. Example: ₹10L invested at 12% returns for 20 years → 0.5% vs 2% expense ratio = ₹27L difference in final corpus (₹97L vs ₹70L). Every 0.5% in expense ratio = 20-25% loss in final wealth over 20 years.

Direct Plans: 0.5-1% lower expense ratio (no distributor commission), higher returns. ₹10k/month SIP for 20 years at 12% pre-expense → Direct (1% expense) = ₹89L, Regular (2% expense) = ₹75L. Difference: ₹14L (18% more in direct). WHO should use Regular: Investors needing hand-holding, portfolio rebalancing (advisor justifies 1% fee). WHO should use Direct: DIY investors, lump sum investors (invest once, forget). Verdict: 95% investors should use Direct—just set SIP and auto-invest. The 'advice' from regular plan distributors is often sales pitch for high-commission products (ULIP, traditional insurance). Buy direct, hire fee-only SEBI-registered advisor separately if needed (₹5-10k/year vs ₹14L over 20 years).

Daily deduction from NAV (Net Asset Value). Formula: Daily expense = (Expense Ratio / 365) × NAV. Example: Fund NAV ₹100, Expense Ratio 1% → Daily expense = (1% / 365) × ₹100 = ₹0.00274/unit. Your 1000 units worth ₹1L → Daily deduction ₹2.74. Annually: ₹1,000. You DON'T see this as separate charge—it's built into NAV. That's why fund returns are ALWAYS shown 'post-expense'. When fund says '12% returns,' it's AFTER 1% expense deduction (actual portfolio gained 13%, you got 12%). Higher expense = lower published returns. Check factsheet for gross returns (before expense) vs net returns (after expense).

YES, expense ratios can increase/decrease. SEBI limits: Equity funds max 2.25%, Debt funds max 2%. Fund houses can change within limits. Historical trend: Most funds REDUCE expense ratio as AUM (Assets Under Management) grows (economies of scale). Example: Fund starts with ₹100 Cr AUM, 2% expense. Grows to ₹10,000 Cr → Expense drops to 1.5% (same absolute revenue ₹150 Cr, lower % needed). However, some funds INCREASE expenses when adding new fund managers, upgrading research. Check expense ratio annually on AMC website or Value Research. If expense increases greater than 0.3% without AUM growth, consider switching to lower-cost fund (no exit load after 1 year in equity funds).

NO, expense ratio is NOT separately tax-deductible. It's deducted directly from NAV before declaring returns. Your capital gains tax is calculated on NAV (which is post-expense). Indirect benefit: Lower NAV means lower gains, hence lower LTCG tax. Example: Original investment ₹1L, NAV ₹2L (100% gain, direct plan), vs ₹1.8L (80% gain, regular plan). Direct LTCG = (₹2L − ₹1L) × 10% = ₹10k tax. Regular LTCG = (₹1.8L − ₹1L) × 10% = ₹8k tax. You saved ₹2k tax BUT lost ₹20k to expenses. Net loss: ₹18k. Don't optimize for tax—optimize for net returns. Lower expense ratio almost always better.

International funds (US, China, global) have 0.5-1% higher expense due to: (1) Fund-of-funds structure: Indian AMC invests in US-based ETF → Double layer fees (Indian fund 0.5% + underlying ETF 0.3% = 0.8% total), (2) Currency hedging costs: Protecting against rupee depreciation = 0.2-0.4% annual cost, (3) Foreign custodian fees: Holding stocks in US requires custodian = 0.1-0.2%. Example: Motilal Oswal Nasdaq 100 FOF = 0.61% (direct) vs Nifty 50 index = 0.10%. However, international diversification worth it—US markets returned 15-18% annually (2010-2024) vs India 12-14%. Extra 0.5% expense justified by better risk-adjusted returns and rupee diversification.

Switch ONLY if expense difference greater than 0.5% AND fund performance similar. Cost of switching: Exit load (1% if under 1 year in equity), Capital gains tax (10% on LTCG over ₹1L). Example: ₹10L in Fund A (2% expense), considering Fund B (1% expense), both same category. Exit Load = ₹10k, LTCG on ₹2L gain = ₹10k tax (after ₹1L exemption). Total switching cost = ₹20k. Annual savings from 1% lower expense = ₹10k (on ₹10L corpus). Breakeven: 2 years. Verdict: Switch if holding 3+ years. DON'T switch for less than 0.3% expense difference—transaction costs outweigh savings. Better: New SIPs in low-cost fund, let old investment continue (avoid exit load/tax).

India: Average 1-1.5% (equity regular), 0.5-1% (direct). USA: Average 0.5% (actively managed), 0.05-0.2% (index funds/ETFs). Reason for India's higher costs: (1) Smaller AUM per fund (₹5,000 Cr average vs $50 billion in US = higher per-unit costs), (2) Higher distribution costs (agent commissions 0.5-1%), (3) Marketing expenses (ads, branch networks). Global trend: Shift to passive/index funds (expense 0.05-0.25%). In India, index fund AUM still under 15% vs 50%+ in US. As Indian market matures, expect expense ratios to drop. For now, prioritize direct plans and index funds for lowest costs (0.1-0.5% achievable).