- September 8, 2025
What is a good expense ratio?
A lower expense ratio is considered beneficial for investors. In nutshell, low expenses mean lower costs and higher amounts are allocated for investments.
Furthermore, as the Assets Under Management (AUM) of a mutual fund increases, the expense ratio decreases. As per SEBI regulations, the expense ratio is inversely proportional to the asset size of a scheme.
Mutual Fund expense ratio formula
There are two main components while calculating the expense ratio in mutual funds:
- Total expense: This expense may include administrative costs, operational cost, marketing cost, promotional costs, compliance costs, maintenance fees, brokerage, distribution cost etc.
- AUM: This is the asset (funds) under management with a particular scheme of the AMC.
Also Read: Active Funds vs Passive Funds
The formula for calculating mutual funds expense ratio (ER) is
The expense ratio in the context of a Mutual Fund is the expense incurred to manage funds (or a Mutual Fund scheme).
This fee is charged by the respective AMC (Asset Management Company).
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About the Author
Mr Shashi Kant Bahl
Our founder Mr. ShashiKant Bahl and core team members have been associated with the financial services and mutual fund industry for several years. Over time, we have helped a wide range of investors – salaried professionals, business owners, self-employed individuals, and retirees – plan and manage their mutual fund investments.
