Investors should keep a check on cost in passive, debt funds: Experts

In active funds, you may miss out on potential winners if focus is only on expense ratio

Several fund houses – SBI, HDFC, UTI and Tata – have recently hiked the total expense ratios (TERs) of their Nifty and Sensex-based index funds. Expense ratio is deducted from a fund’s gross return to arrive at its net return, which is what the investor receives.

Given the strong link between cost and return, investors must keep an eye on the fees they pay. At the same time, in some categories, a single-minded focus on cost could lead to the exclusion of funds with the potential to produce high returns.

In index funds, competition drove expense ratios to unsustainably low levels. “Fund