Expense Ratio Impact Calculator
See how mutual fund expense ratio affects returns
Compare the long-term impact of different expense ratios on your investment returns. Even a small difference in expense ratio can significantly affect your wealth over time.
Calculate Impact
Compare Expense Ratios
💡 Tip: Lower expense ratios can significantly boost your long-term returns. Even a 1% difference can cost you lakhs over decades!
Understanding Expense Ratios
What is Expense Ratio?
The expense ratio is the annual fee that mutual funds or ETFs charge their shareholders. It's expressed as a percentage of the fund's average assets under management.
- Covers fund management costs
- Deducted from fund returns
- Impacts long-term wealth
Why It Matters
- Lower expenses = Higher returns
- Compounds over time
- Can cost lakhs over decades
- Often overlooked by investors
Typical Expense Ratios in India
Index Funds
0.1% - 0.5%
Lowest expense ratios, passively managed
Equity Funds
1% - 2.5%
Actively managed equity mutual funds
Debt Funds
0.5% - 2%
Fixed income and debt mutual funds
What's Included in Expense Ratio?
- Fund manager's fees
- Administrative costs
- Marketing and distribution
- Legal and compliance
- Custodian fees
- Record keeping
How the Calculator Works
This calculator compares two funds with different expense ratios to show you the real cost over time. The formula used is:
Final Value = Principal × (1 + Net Return)^Years - • Net Return = Gross Return - Expense Ratio
- • The difference between two funds shows the cost of higher expenses
- • This cost compounds over time, growing significantly
Important: A seemingly small 1.5% difference in expense ratio can cost you several lakhs over 20-30 years. Always consider expense ratios when selecting mutual funds!
Why Our Expense Ratio Calculator Stands Out
Side-by-Side Comparison
Compare two funds with different expense ratios simultaneously. See the real cost difference in rupees, not just percentages, over your investment horizon.
Long-term Impact Visualization
See how small expense ratio differences compound into massive cost differences over 10, 20, or 30 years. Make data-driven fund selection decisions.
Indian Fund Benchmarks
Compare against typical expense ratios for Indian index funds (0.1-0.5%), equity funds (1-2.5%), and debt funds (0.5-2%). Know if you're paying too much.
How to Use the Expense Ratio Calculator
Enter Investment Amount
Input the amount you plan to invest. This will be the principal for both funds you're comparing, allowing for an apples-to-apples comparison.
Input Expected Return and Time Period
Enter the expected gross annual return (before expenses) and your investment time horizon. Longer periods show more dramatic expense ratio impact.
Compare Two Expense Ratios
Enter the expense ratios of two funds you're considering. For example, compare an index fund (0.2%) vs actively managed fund (1.5%) to see the cost difference.
Analyze the Cost Impact
View the final values of both funds and the difference in returns. The "Cost of Higher Expense" shows exactly how much extra you're paying in rupees.
Frequently Asked Questions
What is a good expense ratio for mutual funds?
Index funds: 0.1-0.5% is excellent. Actively managed equity funds: Below 1.5% is good, 1.5-2% is average, above 2% is high. Debt funds: Below 1% is good. Lower is always better. A difference of even 0.5% can cost lakhs over 20-30 years due to compounding. Always compare expense ratios when choosing between similar funds.
Why do actively managed funds have higher expense ratios?
Actively managed funds employ professional fund managers who research stocks, make trading decisions, and attempt to beat market indices. This requires higher salaries, research costs, and frequent trading expenses. Index funds simply track an index passively, requiring minimal management - hence lower costs. However, higher expense doesn't guarantee better returns.
How is expense ratio deducted from my investment?
Expense ratio is not directly deducted from your account. Instead, it's factored into the daily NAV (Net Asset Value) calculation. If a fund earns 12% but has a 1.5% expense ratio, the NAV reflects 10.5% return. You don't see a separate deduction - it's already adjusted in the unit price you see. This happens daily, throughout the year.
Should I only choose funds with the lowest expense ratio?
Not always. While expense ratio is important, also consider: (1) Fund's track record and consistency, (2) Fund manager's expertise, (3) Investment strategy alignment with your goals, (4) Fund size and liquidity. Sometimes a fund with 1.2% expense consistently outperforming a 0.5% expense fund by 3-4% is worth it. Balance cost with quality and performance.
Do expense ratios change over time?
Yes, expense ratios can change. Fund houses review them periodically based on fund size, regulatory changes, and operational costs. As a fund grows (higher AUM), expense ratios often decrease due to economies of scale. SEBI regulates maximum expense ratios - 2.25% for equity funds and 2% for debt funds. Always check current expense ratios before investing.
Are there any other fees besides expense ratio?
Expense ratio covers most ongoing costs, but watch for: (1) Exit load - charged when you redeem units early (typically 1% if redeemed within 1 year), (2) Transaction charges - one-time charge for investments above ₹10,000, (3) Securities Transaction Tax (STT) - levied on equity fund redemptions. Expense ratio doesn't include these, so factor them into your total cost.