Expense ratio and TER: what costs really mean for investors

The Total Expense Ratio (TER) is the annualised percentage of scheme assets used to run the scheme — including management and other permitted expenses as disclosed. It is deducted within the scheme; you do not usually pay it as a separate invoice.

A lower TER is not automatically “better” in isolation. Strategy, risk, liquidity and fit to your goal still matter. But ignoring costs is also a mistake.

Direct vs Regular — a transparency point

Direct plans typically carry a lower expense ratio because they do not include distributor commission. Regular plans include commission paid by the AMC to distributors; that cost is reflected in the plan’s expenses.

RK Wealth deals in Regular plans and earns trailing commission as disclosed at the time of investment. Direct plans are available to investors who wish to invest without a distributor. We do not earn commission on Direct plans and do not process them.

Questions to ask while reading a factsheet

• What is the current TER for the plan you are considering?
• Is this a Direct or Regular plan?
• What exit load applies if you redeem early?
• Are you comparing costs across similar categories — not across unrelated strategies?