Should I worry about expense ratio?

As a general rule, mutual funds that invest in large companies should have an expense ratio of no more than 1\%, while a fund that focuses on small companies or international stocks should have an expense ratio lower than 1.25\%.

Should I look at gross or net expense ratio?

In short, the net expense ratio is how much investors are actually paying to invest in a fund. The gross expense ratio is how much you could pay. For this reason, I always suggest making investment decisions with the gross expense ratio in mind.

How does expense ratio affect mutual fund?

Expense ratios indicate how much the fund charges in terms of percentage annually to manage your investment portfolio. If you invest Rs. 20,000 in a fund which has an expense ratio of 2\%, then it means that you need to pay Rs. 400 to the fund house to manage your money.

Why would an investor choose a higher cost fund?

Some funds with higher expense ratios may be justified if they consistently outperform and continue to outperform other funds with lower expense ratios. Consistently outperforming is a rarity in the investment world. Additionally, higher returns are never guaranteed, but a lower expense ratio can be.

Why are Vanguard fees so low?

One reason Vanguard maintains such low fees is the economy of scale of its equity index funds, which are among the biggest and cheapest in the industry. “We can keep passing on the economies of scale to the investors, who are basically creating them,” said Joseph Brennan, director of global equity indexing.

How do you explain expense ratio?

An expense ratio is an annual fee expressed as a percentage of your investment — or, like the term implies, the ratio of your investment that goes toward the fund’s expenses. If you invest in a mutual fund with a 1\% expense ratio, you’ll pay the fund $10 per year for every $1,000 invested.