{"id":35774,"date":"2022-12-12T11:41:58","date_gmt":"2022-12-12T11:41:58","guid":{"rendered":"https:\/\/www.5paisa.com\/finschool\/?p=35774"},"modified":"2022-12-15T16:38:48","modified_gmt":"2022-12-15T16:38:48","slug":"mutual-fund-expense-ratio","status":"publish","type":"post","link":"https:\/\/www.5paisa.com\/finschool\/mutual-fund-expense-ratio\/","title":{"rendered":"What Is Expense Ratio In Mutual Fund \u2013 Meaning, Calculation and Importance"},"content":{"rendered":"\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t\t
\n\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t
\n\t\t\t\t\t\t\t\t\t

Mutual Funds is one such financial instrument which helps in long term investment. In short, you will have some additional amounts apart from your regular savings in your account after your retirement. Well, nothing comes free of cost!<\/p>

Have you ever realized that whatever investments you are doing in Mutual Fund a percentage of it is getting deducted as a fee? Yes, This fee is known as Expense Ratio. Here we will make you understand what is Expense Ratio, Why it is important, Components of Mutual Fund Expense Ratio, How Does it impact fund return, Sebi Limits for Mutual Fund Expense Ratio and Expense Ratio Implications<\/p>

So Let us begin with\u00a0<\/strong><\/p>

What is an Expense Ratio?<\/strong><\/span><\/h2>

\"\"<\/p>

The Mutual Fund Expense Ratio is the fee charged by mutual fund firms or exchange traded fund (ETF). This fee includes administration, portfolio management, marketing and more. It is usually percentage based. Value of the expense ratio depends on the size of the mutual fund. Expense Ratios have inverse relationship with the size of the respective mutual fund.<\/p>

How To Calculate Expense Ratio<\/span><\/strong><\/h2>

Expense Ratio = Total Expenses\/Total Assets of the Funds<\/strong><\/span><\/p>

Where higher the asset lower will be the ratio and vice versa.<\/p>

Let us understand this concept with an example<\/strong><\/span><\/h3>

Suppose there is Mutual Fund Company has Asset under Management worth Rs 4 Crores. In order to Manage the fund, Fund House charges fees for administration, management and distribution amounted to Rs 4,00,000\/-<\/p>

The total\u00a0expense ratio\u00a0for this fund would be calculated as below:<\/p>

Expense ratio\u00a0= 5 lakhs\/5 crores = 1%<\/p>

\u00a01% is the amount of the total\u00a0assets\u00a0that need to be paid out in order to manage the fund.\u00a0<\/p>

Components of Mutual Fund Expense Ratio<\/strong><\/span><\/h2>

\"\"<\/p>