Investing
Expense ratio
The yearly fee a mutual fund charges you, expressed as a percentage of your money.
This is what the fund company charges annually to manage your money. A 1% expense ratio on ₹1L means ₹1,000 a year, quietly deducted from the fund.
It sounds tiny but it compounds against you for decades. The difference between a 0.2% index fund and a 1.5% active fund can be lakhs over 20 years.
You never see it as a separate bill. It is already baked into the NAV, which is exactly why people ignore it and shouldn't.
For example
On a ₹10L portfolio, a 1.3% regular plan versus a 0.3% direct plan is a ₹1,000/month difference. Over 25 years, that gap alone is many lakhs.