Expense Ratio Impact Calculator

Q: How much does a 1% higher expense ratio cost?

It depends on the amount, the return and the time. {cur}1,00,000 plus {cur}10,000 a month for 20 years at 12% gross ends about {cur}13,41,062 lower at 1.5% than at 0.5%.

What a higher mutual fund expense ratio costs over the years: the same lump sum and SIP at the same gross return, less expense ratio A or B, and the fees charged along the way.

Last updated 24 Sep 2026

Expense ratio impact

CurrencyTwo expense ratios → the difference

Lump sum invested at the start ($)0 if you invest only by SIP.

Monthly SIP ($)0 if you invest only a lump sum. Invested at the start of each month.

Gross return before costs (% a year)What the portfolio earns before the fund’s expenses. An assumption, not a promise.

Expense ratio A (% a year)The scheme’s total expense ratio, from its factsheet or website.

Expense ratio B (% a year)For example the direct plan of the same scheme, or an index fund.

Years

Inflation (% a year)Defaults to your currency’s central-bank target (India 4%, US/UK/Euro/Canada 2%). Actual inflation often runs higher — try 5–6% for a cautious plan. For AED, SAR, PKR, BDT and MYR there is no official target: enter your own estimate.

$13,41,062Example

$1,00,000 at the start plus $10,000 a month for 20 years, 12% gross, expense ratio 1.5% (A) or 0.5% (B)

Value after costs, and the expenses charged

V = L × (1 + i)ⁿ + P × [(1 + i)ⁿ − 1] ÷ i × (1 + i), with i = (gross − TER) ÷ 12 ÷ 100. Expenses charged = TER ÷ 1200 × the sum of the monthly balances

L, P: the lump sum at the start and the monthly SIP at the start of each month
TER: the total expense ratio, % a year; subtracted from the gross return as a yearly approximation of a charge accrued daily
n: the number of months
expenses charged: each month’s charge is TER ÷ 12 ÷ 100 of that month’s balance. The value lost is larger, because money taken as expenses also stops growing

Worked example

$1,00,000 at the start plus $10,000 a month for 20 years, 12% gross, expense ratio 1.5% (A) or 0.5% (B)
Net returns: 12 − 1.5 = 10.5% and 12 − 0.5 = 11.5%; n = 240
(1 + 10.5/1200)²⁴⁰ = 8.0919; (1 + 11.5/1200)²⁴⁰ = 9.8656
A: 1,00,000 × 8.0919 + 10,000 × (8.0919 − 1) ÷ 0.008750 × 1.008750 = $89,85,160
B: the same at 11.5% = $1,03,26,221
B − A = $13,41,062, on $25,00,000 invested

How much a higher expense ratio costs: 1,00,000 plus 10,000 a month at 12% gross, B at 0.5%

Value lost with the higher expense ratio. The cost compounds: it grows much faster than the years.
A is higher by	10 years	20 years	30 years
0.25 percentage point	$40,759	$3,55,388	$19,15,401
0.5 percentage points	$80,749	$6,96,989	$37,16,474
1 percentage points	$1,58,479	$13,41,062	$70,03,516
1.5 percentage points	$2,33,312	$19,36,445	$99,12,569

Why a small percentage becomes a large sum

A fund’s total expense ratio (TER) is the yearly cost of running the scheme, stated as a percentage of its assets: the fund manager’s fee, distribution costs, and other charges. You never see a bill. The expense is taken from the scheme’s assets every day, so the NAV you see is already net of it. SEBI’s mutual fund regulations cap how much a scheme may charge, with lower limits for larger schemes, and the offer document states the maximum for each scheme. The direct plan of a scheme has a lower expense ratio than its regular plan, because it pays no distributor commission.

A difference of one percentage point sounds small. On the example it is $13,41,062 after 20 years, on $25,00,000 invested. Two things compound. The fee is charged on the whole balance, not on your gains, so it grows as the balance grows. And every rupee paid in expenses also stops earning a return. Over the period, expense ratio A charges $9,26,451, but compared with a fund that cost nothing it leaves you $20,95,575 behind, about 19% of the no-cost value.

The page subtracts the expense ratio from the gross return once a year and then uses the net return ÷ 12 as the monthly rate, the same convention as the SIP calculator. A charge accrued daily works out very slightly differently, but the difference is small next to the uncertainty in the return itself.

A lower cost is certain, while a higher return is not, and that is why it matters. A higher expense ratio is worth paying only if you expect the fund to earn at least that much more before costs, or to give you something else you value, such as advice. Compare the same scheme’s direct and regular plans, or an active fund against an index fund, with the scheme’s own disclosed figures. Past returns are no promise of future ones. This is arithmetic on the figures you enter, not financial advice.

Frequently asked questions

What is the expense ratio of a mutual fund?

The yearly cost of running the scheme, as a percentage of its assets. It covers the fund manager’s fee, distribution costs and other expenses. SEBI’s regulations cap it, and the scheme discloses its current expense ratio on its website and factsheet.

How is the expense ratio charged?

It is taken from the scheme’s assets every day, so the published NAV is already net of it. You never pay it separately. This page approximates the daily charge by subtracting the yearly expense ratio from the yearly return.

How much does a 1% higher expense ratio cost?

It depends on the amount, the return and the time. $1,00,000 plus $10,000 a month for 20 years at 12% gross ends about $13,41,062 lower at 1.5% than at 0.5%.

Is a lower expense ratio always better?

For the same portfolio, yes: the direct plan of a scheme holds the same investments as the regular plan at a lower cost. Between different funds, cost is only one factor, although it is the one you can know in advance.

Related calculators

References

Securities and Exchange Board of India. SEBI (Mutual Funds) Regulations, 1996, Regulation 52 (limits on the expenses charged to a scheme), and the SEBI (Mutual Funds) Regulations, 2026 approved by the SEBI Board in December 2025, which restate the limits as a base expense ratio with statutory levies charged separately.
Association of Mutual Funds in India (AMFI), Mutual Funds Sahi Hai. What are the expenses involved in a mutual fund scheme? https://www.mutualfundssahihai.com/en/what-are-expenses-incurred-mutual-fund-scheme
Bodie Z, Kane A, Marcus AJ. Investments. McGraw-Hill. Risk and return, and the time value of money.
Brealey RA, Myers SC, Allen F. Principles of Corporate Finance. McGraw-Hill. Present and future values, annuities and growing annuities.
Securities and Exchange Board of India (SEBI) / Association of Mutual Funds in India (AMFI). Mandatory risk statement for mutual fund communications: “Mutual fund investments are subject to market risks, read all scheme related documents carefully.”
Central-bank inflation targets used as default inflation by currency: Reserve Bank of India (4% CPI, flexible inflation targeting framework); U.S. Federal Reserve (2% PCE); European Central Bank (2%); Bank of England (2% CPI); Bank of Canada (2%); Reserve Bank of Australia (2–3%); Bangko Sentral ng Pilipinas (3% ± 1). Actual inflation often runs above target.