Expense ratio

The Hindu Business Line  Sep 7  Comment 
That depends on the type of fund you invest in. Here are points to note
USAToday.com  Oct 21  Comment 
Investors must always pay attention to expense ratios.
The Hindu Business Line  Oct 19  Comment 
  In an investor-friendly gesture, Quantum Mutual Fund has decided not to hike the expense ratio of its eight schemes. The decision comes in response to the action o...
The Hindu Business Line  Sep 14  Comment 
Plans to entrust retired officials with selling mutual fund schemes
The Hindu Business Line  Sep 3  Comment 
Analysts feel lot of room to widen reach in top 15 itself
The Hindu Business Line  Aug 16  Comment 
Investors in equity funds with a good record need not worry too much
The Economic Times  Jul 18  Comment 
The proposal to raise the expense ratio, if approved by Sebi, could result in unitholders shelling out almost 55 basis points (0.55%) more than what they are paying now.
The Hindu Business Line  Jul 17  Comment 
SEBI board to meet on Aug 16 to take a call
The Hindu Business Line  Jul 2  Comment 
Finance Ministry keen to energise the distribution network


Expense ratio is the ratio of the expenses incurred by the management in order to run an Exchange Traded Fund (ETF) or a mutual fund divided the total assets held by the fund. In other words, it is the percentage of assets taken back by the management in order to run the fund.

Generally, the major expenses incurred by the fund are the management fees, which include mostly management fees and operating expenses, if any. Due to the fact that management fees take up bulk of the expenses, this ratio is also called the Management Expense Ratio. Another significant expense is the 12b-1 fees which is classified as marketing and promotion expenses under the FINRA rules. Other miscellaneous costs could be legal fees, auditing fees, accounting or recordkeeping and taxes, amongst others[1].

On average the expense ratio of an index fund (a passively managed fund) will be far lower than an actively managed mutual fund. Index funds seek to track the performance of a benchmark index (e.g. The Vangaurd 500 Index Investor tracks the performance of the S&P 500), meaning they generally refrain from trading except to keep the fund's portfolio in line with the benchmark index. In contrast, actively managed funds have much more freedom in ability to trade, and often trade frequently in search of market beating returns. As a result, operating expenses and thus the expense ratios are often larger for actively managed funds than for index funds.


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