Mutual Fund Expense Ratio Calculator
What a higher expense ratio costs over the years, for a SIP or a one-time investment
₹10,000 a month for 20 years at 12% before costs grows to ₹93.4 lakh at a 0.5% expense ratio and ₹81.76 lakh at 1.5%: the 1.5% plan ends ₹11.64 lakh lower.
Cost of the higher expense ratio
₹11,63,698
- Corpus at 0.5%
- ₹93,39,666
- Corpus at 1.5%
- ₹81,75,968
12.5% of the final corpus, on ₹24,00,000 invested.
How the gap builds
- Invested
- ₹24,00,000
- Net return at 0.5%
- 11.5% p.a.
- Net return at 1.5%
- 10.5% p.a.
- Gap after year 5
- ₹22,016
- Gap after year 10
- ₹1,28,847
- Gap after year 15
- ₹4,32,552
- Gap after year 20
- ₹11,63,698
- Difference at the end
- ₹11,63,698
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How this is calculated
Formula
FV = P × [((1 + i)ⁿ − 1) / i] × (1 + i), with i = (g − TER) ÷ 12
- g
- = return before costs, a year
- TER
- = total expense ratio, a year
- n
- = number of monthly instalments
With your numbers
- 1Net return, plan Ag − TER(A)12% − 0.5% = 11.5%
- 2Net return, plan Bg − TER(B)12% − 1.5% = 10.5%
- 3Grow eachFV at each net return₹93,39,666 and ₹81,75,968
- 4The costFV(A) − FV(B)₹93,39,666 − ₹81,75,968 = ₹11,63,698
- The expense ratio is taken out of the fund’s assets every day, so it comes off the return rather than being billed. Over a year that removes very nearly the TER from the return, which is the convention here.
- Because the cost comes off the return, it compounds: the gap grows faster than the money invested.
- Exit loads, the fund’s own trading costs and tax are not included, and a fund’s TER can change over time.
Frequently Asked Questions
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Terms used here
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