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Next toolsAssumptions and methodology
Transparent calculation notes for Expense Ratio Calculator.
Formula used
The projection compounds the investment using net return assumptions after expense ratio drag.
Methodology
- Convert gross expected return into net return for each expense-ratio case.
- Compound investment value over the selected time period.
- Compare final values and fee drag between the two cases.
- Fees each year = expense ratio × that year's opening value; the value gap also includes the growth those fees would have earned.
- SIP mode compounds monthly at (return − expense ratio) ÷ 12, with each instalment at the start of the month. One-time mode compounds yearly.
Core assumptions
- Gross return and expense ratios stay constant.
- Expense ratio impact is reflected as annual return drag.
- One-time mode invests a single amount today; Monthly SIP mode invests the same amount at the start of every month, with no step-up.
Not included
- Tracking error, taxes, exit load, fund turnover costs, and changing expense ratios are excluded.
- Actual fund returns are market-linked and can differ materially.
About Expense Ratio Calculator
Guide1What is Expense Ratio?
The expense ratio is the annual fee that mutual funds charge investors as a percentage of total assets under management (AUM). It covers fund management fees, administrative costs, marketing expenses, and other operational costs.
While the percentage may seem small (typically 0.05% to 2.5%), it compounds over time and can significantly erode your returns. Even a 0.5% difference in expense ratio can mean lakhs of rupees over a 20-30 year investment horizon.
2How Expense Ratio Affects Your Returns
The expense ratio is deducted from the fund's NAV daily, which means you never see it as a direct charge. Your effective return is the gross return minus the expense ratio.
- Direct plans: usually 0.5–1 percentage point cheaper than the regular plan of the same scheme, because no distributor commission is paid
- Index Funds: Usually have the lowest expense ratios (0.05-0.20%)
- Active Funds: Higher expense ratios (1-2.5%) due to active management
From 1 April 2026, SEBI's Mutual Funds Regulations, 2026 cap the base expense ratio (BER), which is what the fund house charges for running the scheme: for example up to 2.10% a year on the first ₹500 crore of an equity scheme and 0.90% for index funds and ETFs. Brokerage (within SEBI's caps) and statutory and regulatory levies such as GST, STT, stamp duty and SEBI and exchange fees are charged on top of the BER. The total expense ratio (TER) in the factsheet is the BER plus these costs. Enter the TER here, because that is the full amount taken from the NAV.
3How to Use This Expense Ratio Calculator
- Step 1: Choose One-time for an amount you invest today or Monthly SIP for an amount you invest every month, then enter the amount and the duration
- Step 2: Enter the expected return before fund expenses. Returns on factsheets and apps are already after expenses, so add the fund's expense ratio back first (11% after a 1% expense ratio means entering 12%)
- Step 3: Enter the expense ratios of Fund A and Fund B, for example a direct and a regular plan of the same scheme
- Step 4: See which fund keeps more, and how much of the gap is the extra fees and how much is the growth those fees would have earned
4Why Expense Ratio Matters
- Compounding Impact: Fees compound against you just as returns compound for you
- Long-term Drag: A 1% higher expense ratio can reduce your final corpus by 15-25% over 25 years
- Direct vs Regular: Switching to direct plans can save ₹5-15 lakhs over a long investment horizon
- Performance Comparison: Always compare fund returns after accounting for expense ratios