Expense ratio: Shun active funds with high costs, inconsistent performance

A higher expense means a larger portion of the return goes to the asset management company

The expense ratios of several equity mutual funds have increased between September 2024 and March 2025, according to media reports. Investors should avoid knee-jerk reactions and respond to changes after proper thought.

 

Why are fees increasing

 

Total expense ratio (TER) is calculated by dividing the expense incurred on a fund by its assets under management. “AUMs of many funds have declined due to the market correction, but the expense incurred on them has remained unchanged, hence TERs are showing an increase,” says Alekh Yadav, head of investment product, Sanctum Wealth.

 

In some cases, TERs may have increased despite an increase