Investing
NAV and Expense Ratio Explained
Two mutual-fund numbers are often misunderstood: NAV tells you the value per unit, while the expense ratio affects what the scheme retains over time.
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What the expense ratio does
The expense ratio represents recurring scheme expenses as a proportion of assets. These costs are reflected in NAV rather than appearing as a separate monthly debit. Small annual differences can compound into meaningful gaps across long periods, although cost alone does not predict performance.
Direct and regular plans
Direct and regular plans of a scheme generally share the portfolio and manager. The regular plan includes distributor-related costs and therefore normally has a higher expense ratio. Advice and distribution may still have value, but an investor should understand how it is paid for.
Better comparison questions
First compare objective, benchmark, portfolio, risk and investment process. Then review tracking difference for index funds, consistency across full market cycles, expense ratio and exit load. Avoid selecting a fund from NAV, star rating or one-year return alone.
Sources and verification
Use these references to verify this investing guide. Check the document date, relevant period and any conditions before relying on a figure or rule.
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