Total expense ratio (TER) is associated with the total costs involved in managed funds like MFs. These costs include fund management fees, operational expenses, administrative expenses and distributor commission
Total expense ratio or TER is associated with the total costs involved in managed funds like mutual funds (MF). These costs include fund management fees, operational expenses, administrative expenses and distributor commission. The aggregate of these costs as a proportion of the total assets under management of a fund is what constitutes TER.
In India, for mutual funds, the capital markets regulator has mandated two separate TERs for the same fund. One, TER for regular plans, where distributor commission is included. Two, TER for direct plans, where commission is not included. The difference in the two is the distribution commission expense for the fund.
For investors, TER is embedded in the price (net asset value) paid to buy the fund or its daily NAV, which means you will not see the cost separately. All fund houses publish scheme-wise TER on their websites and in their fund factsheets. Usually, TER for equity-oriented funds, other than exchange- traded funds and index funds, is higher than TER for debt funds.
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