In this lecture we'll discuss expense ratio. Now, if you are already invested in mutual funds, you would be seeing occasional emails from your AMC with a subject line like changing p or not p r basically stands for total expense ratio. So, what exactly is an expense ratio or total expense ratio? Let us discuss it. The expense ratio is the per unit cost incurred in managing the mutual fund. AMC is declared an expense ratio once every six months.

So, investors should get a notification from the AMC once every six months regarding what is the current expense ratio what the mutual fund notification normally comes in the form of I email. Lower the expense ratio, the better it is Further investor. Higher expense ratio simply means that the AMC is charging more money for managing the mutual fund. Hi manage higher fees basically means that the return from the mutual fund producers or the investor index funds have lower expense ratios compared to other managed mutual funds. Now we look at the formula for calculating expense ratio. Total expense ratio is equal to total expenses divided by the total assets under management.

The expenses involved in managing mutual funds includes management fees, trading fees, legal fees, auditors, fees, operational expenses etc. expense ratio is generally between 0.5% and 2%