Expense Ratios of Mutual Funds in India

It’s hard to find what Indian mutual funds charge their customers to manage their money for them. The so called “expense ratio.” Try to find it on, say, the UTI website, or SBI’s MF website.

Also, since January 2013, SEBI (the market regulator) made it mandatory for all mutual fund houses (AMCs) to offer what is called a direct plan. Every fund offered by every AMC will have a direct plan where the AMC will charge you a lower expense ratio. This is the money saved by the AMC because you went directly to them, and not through your neighborhood bank branch manager or ShareKhan. This lower expense ratio is also hard to find.

My favorite mutual fund research website, Value Research Online (vro.in) also, surprisingly, does not make it easy to find the expense ratio of a particular fund. Other sub-standard sites like Money Control do not care about listing expense ratios at all.

Now, why the fuss about expense ratios?

  1. You do want the cheapest deal, don’t you?
  2. A fund that charges 2.6% vs. a fund that charges 0.15% to manage your money. Compound this difference over 15 years, and you will see what the fuss is about.

So, what’s the solution?

  1. Call the AMC directly. Some of the “customer care” personnel do not know what a “direct plan” is. Tough luck. But this approach typically works.
  2. Go to any list view on Value Research Online’s website — say, funds from HDFC, or all Large Cap Funds, or any other list that can be sorted on expense ratios. This seems to be the only way to find expense ratios in this otherwise great website.
  3. Download the latest factsheet from the AMC website. Most AMCs do have expense ratios buried deep inside the takes-forever-to-download facesheet somewhere.
  4. I hate saying this, but invest in HDFCFund. I am not affiliated in any way to HDFC or HDFCFund, but I found their website (logged in and logged out) the best to use. They list their expense ratios boldly, they offer cheap expense ratios, you have a great range of funds, their index funds are very cheap, and you can do everything online (except for opening the account).

I have been a direct plan customer of UTI, SBI, ICICI-Prudential, IDFC, HDFC, Taurus, and Quantum Mutual Funds. Here’s my order of preference based on the range of funds, past performance of funds, expense ratios, complete online usage, and overall experience.

  1. HDFCFund
  2. IDFC (if they had a Flex STP, they would rank #1 with HDFC)
  3. ICICI-Prudential (Cannot cancel STP’s online)
  4. Quantum Mutual Fund (wish they had a slightly wider range)
  5. UTI, SBI, and Taurus: all of their websites sucked. Funds are ok.

Well, that’s that.

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