Mutual Fund Expense Ratio

Mutual fund expense ratio refers to the percentage of expenses which are made by the mutual fund in order to operate the fund. It includes all expenditures like salary of employees, fees paid to exchanges and other such administrative expenses. Given below is the formula for calculating the same –

Administrative expenses/Assets under management

A typical mutual fund will have ratio in the range of 1 to 2 percent; the percentage may vary from one firm to another. However a higher ratio would indicate inefficiency of the company in running its operations. Investors are interested in looking at this ratio because a higher ratio would mean lower returns for them as these costs are deducted from returns earned by the firm during a particular period.

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