Your account statement shows no fee line anywhere. What does that tell you about the expense ratio?

Nothing at all — it comes out of the NAV daily, so the published NAV is already after it

That this particular scheme does not charge one

That it comes off only when you redeem your units

You redeem three months in, and the scheme states an exit load for that period. What happens?

A charge — often around 1% — comes out of what you get back

Nothing, because exit loads apply only to new fund offers

The year's expense ratio comes back to you, since you held for only three months

Lesson 2 of 3 · 7 min

NAV, the invisible fee, and the riskometer

Why a low NAV is not a bargain, how the expense ratio comes out of your money daily without a bill ever arriving, and how to read the riskometer.

NAV — net asset value — is the value of one unit: everything the fund holds, minus what it owes, divided by the number of units. It is published every trading day. That is all it is. It is not a price tag that makes a fund cheap or expensive.

Myth

“A fund with NAV ₹10 is cheaper than one with NAV ₹500, so you get more for your money.”

False

₹5,000 buys ₹5,000 of basket either way — 500 units at ₹10 or 10 units at ₹500. If both baskets grow 10%, both investments become ₹5,500. NAV is high mostly because a fund is old and has grown. New fund offers are marketed at "just ₹10" precisely because this myth sells.

So a low NAV is not a discount?

KabirTara

Kabirasking
I still do not get it. One fund's unit costs ₹10 and another's costs ₹500. How is the ₹10 one not cheaper?
Taraexplaining
Cheaper than what? You are not buying a thing at a price. You hand over a fixed sum and get back a slice of whatever the scheme owns. The basket does not care how finely it is sliced.
Kabirasking
But I end up holding more units.
Taraexplaining
More slices of a thinner cake. Multiply units by NAV and you are back at the same rupees. The unit count is arithmetic. It tells you nothing about what the fund actually owns.
Kabirasking
Then why do new schemes launch at that low number so often?
Taraexplaining
Because the feeling you just described sells. A high NAV usually means the scheme is old and has grown. What moves your outcome is what the basket holds, and what the fund charges you to hold it.

Your turn

You invest ₹5,000 in a fund whose NAV is ₹50. How many units do you get?

The expense ratio is the fund's annual fee — a percentage of your money, deducted a tiny slice at a time from the NAV every single day. You never get a bill and never feel it, which is exactly why it deserves attention. SEBI caps it, and every scheme discloses it.

Sort it

1 / 4

Does this actually change what you keep?

The expense ratio

Match them up

Six words a scheme document uses

Pick a term, then pick what it actually means.

Pick a term on the left.

Quick check

How do you actually pay a mutual fund's expense ratio?

Check yourself

1 / 3

Kabir asks

₹5,000 goes into a scheme at NAV ₹10; another ₹5,000 goes into one at NAV ₹500. Both baskets then grow 10%. What do you hold?

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