{"id":3726,"date":"2025-03-21T16:52:51","date_gmt":"2025-03-21T11:22:51","guid":{"rendered":"https:\/\/www.torusdigital.com\/toruscope\/?p=3726"},"modified":"2025-06-10T00:47:21","modified_gmt":"2025-06-09T19:17:21","slug":"what-is-ter-in-mutual-fund","status":"publish","type":"post","link":"https:\/\/www.torusdigital.com\/toruscope\/mutual-funds\/what-is-ter-in-mutual-fund\/","title":{"rendered":"Total Expense Ratio (TER) in Mutual Funds: Meaning & How to Calculate"},"content":{"rendered":"

[vc_section el_id=”blog-inner-layout”][vc_row overlay_dotted=””][vc_column el_class=”blog_primary”][vc_row_inner][vc_column_inner][vc_column_text css=””]Mutual fund investments have costs that are a primary factor for influencing returns. <\/span>Total expense ratio<\/b> is one of the most important metrics to consider while investing in mutual funds. This is the annual expense a fund incurs for management and operations. A high <\/span>TER in mutual funds<\/b> can decrease profits, while a lower TER helps maximise returns.\u00a0<\/span><\/p>\n

Understanding how <\/span>TER <\/b>works and its effect on investments will help in making informed decisions. Read further to know everything about TER in detail!<\/span><\/p>\n

<\/span>What is TER in Mutual Funds?<\/b><\/span><\/h2>\n

An investor must consider many critical aspects before investing in mutual funds. One crucial aspect is the <\/span>total expense ratio<\/b>, which accounts for the amount paid to fund managers and other service providers for handling mutual investments. It encompasses everything from management fees and administrative costs to operational and marketing expenses \u2014 the total expense is compensated with the TER, which influences investors\u2019 net returns.<\/span><\/p>\n

Knowing <\/span>what is TER in mutual funds<\/b> enables investors to pick cost-effective funds and maximise their long-term returns. The <\/span>total expense ratio<\/b> represents the annual cost that an asset management company (AMC) <\/a><\/strong>levies to administer and manage its mutual fund. This ratio is disclosed as a percentage of a fund’s total assets under management.<\/span><\/p>\n

A high TER would mean lesser profit, while a lower <\/span>TER in mutual funds<\/b> means that more of the returns remain with the investor. For two mutual funds of the same category that have similar returns, the fund with the lower TER has higher return potential due to lower costs.\u00a0<\/span><\/p>\n

For example, if a mutual fund has a TER of 1.5%, it means that for every \u20b9100,000 invested, \u20b91,500 is deducted annually to cover fund management expenses.<\/span><\/p>\n

<\/span>How does the TER Works?<\/b><\/span><\/h2>\n

In mutual funds, the TER is deducted from the total assets of a fund before calculating the NAV. This means that, as the TER is already added to the NAV, investors do not see it being subtracted directly from their investment holdings. Although the expense ratio affects the payout investors receive, it does so indirectly, as a higher <\/span>total expense ratio<\/b> (TER) reduces the final payout. Here is how TER works in mutual funds:<\/span><\/p>\n