Mutual Funds & ETFs

How is the expense ratio a drag on mutual fund returns?

The expense ratio drags on mutual fund returns because it is an annual fee, charged as a percentage of your invested amount, that is deducted before returns reach you. Even a small percentage compounds against you over time, so the gap between gross and net return widens the longer you stay invested. For example, a 1.5 percent expense ratio on Rs 10 lakh costs Rs 15,000 every year, and that drag grows as the balance grows. Cost is one of the few variables you can know in advance, which is why fee structure deserves the same scrutiny as past performance.

Crypto investments are subject to market risk and volatility. Past performance is not indicative of future returns. This is general information, not investment advice — consider your own circumstances or consult a qualified adviser before investing.