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. Index funds charge 0.1-0.3%, active funds charge 1-2.5% in India.
Typical Ranges
Index funds: 0.05-0.30%, Active equity: 0.5-1.5%. Above 2% is expensive.