An expense ratio is a fee that mutual funds charge for managing your investments. This fee represents a percentage of the scheme's Assets Under Management (AUM).
How expense ratio works
The Asset Management Company (AMC) charges the expense ratio before announcing the daily Net Asset Value (NAV). The company deducts this fee from the NAV before declaring the daily price. The expense ratio for each scheme is published monthly as part of the factsheet on the respective AMC's website. You can also find the expense ratio of any mutual fund scheme on Coin.
Why your fund's expense ratio may look higher than usual
SEBI now requires AMCs to report the full Total Expense Ratio (TER), including charges that were previously hidden or shown separately, such as GST on management fees, brokerage, audit fees, and custodian charges. These costs were always being deducted from your NAV. They are just more visible now.
What causes the number to spike is how these costs get recorded. Charges like brokerage, audit fees, and custodian fees do not come in evenly every day. They tend to pile up around month-end, when settlements and accounting close out. So the daily Total Expense Ratio (TER) you see can look elevated at month-end when these costs get booked together, and then settles back down over the rest of the month. Over a full year, it averages out to the stated annual TER.
This is a reporting change, not a cost increase.
Did you know? Direct and regular plans under the same scheme have different expense ratios. Direct plans charge lower expense ratios compared to regular plans.