What is expense ratio?

the expense ratio is the percentage of your investment that a mutual fund charges annually to cover its operational costs. This includes portfolio management fees, marketing expenses, administrative costs, and other fees necessary to run the fund. The expense ratio is generally calculated as a percentage of the fund’s average assets under management (AUM) and is deducted from the investment daily.

For example, if you invest Rs. 10,000 in a fund with an expense ratio of 1%, you will pay Rs. 100 annually as the expense for managing the fund. The expense ratio is not something you pay separately – it's already factored into your fund’s performance and deducted directly from the fund’s returns.