Expense Ratio Explained: The Fee That Quietly Eats Your Returns

The expense ratio is the percentage of your investment a fund charges every year to run itself — fund management, admin, and (in Regular plans) distributor commission.

What's typical? - Index funds: 0.1–0.4% — cheapest, since they just track an index. - Active equity (Direct): ~0.5–1.2%. - Active equity (Regular): ~1.5–2.2%. - Debt funds: usually lower than equity.

Why lower usually wins The fee is deducted from returns every year, forever. A fund charging 2% must beat a 1% fund by a full 1% just to break even with you. Over decades, that gap compounds into lakhs.

But don't chase the cheapest blindly A slightly pricier active fund that consistently beats its benchmark can still be worth it. The point is to weigh cost against consistency — which is exactly what our FundScore does (cost efficiency is one of its six dimensions).

Compare expense ratios side by side in the fund comparison tool.