Market Structure
What is Expense Ratio?
The expense ratio is the annual fee charged by a mutual fund or ETF as a percentage of assets, the cost of having your money professionally managed.
Formula
Expense Ratio = Total Fund Expenses ÷ Total Fund Assets × 100
How to Interpret
Lower is better. Even a 0.5% difference compounds to 10–15% over 20 years. US index funds (Vanguard, Fidelity, Schwab) charge 0.03–0.10%, active funds 0.5–1.0%. International markets like India: index funds 0.10–0.30%, active equity funds 0.5–2.5%.
Typical Ranges
US index funds: 0.03–0.10% (some zero-fee). India index funds: 0.05–0.30%. Active equity (both markets): 0.5–1.5%. Above 1.5% (US) or 2% (India) is expensive.