September 8, 2025 - Updated on March 24, 2026
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).
Like This Blog? Share With Others
About the Author
Mr Shashi Kant Bahl
Mr. Shashi Kant Bahl is a mutual fund professional with nearly 20 years of experience in the financial services industry. Since 2005, he has helped over 10,000 investors manage their mutual fund investments and build long-term wealth. His firm currently manages assets of over ₹734 crore (AUM).
Disclaimer: Mutual fund investments are subject to market risks. Read all scheme-related documents carefully.
