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Expense Ratio

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What is Expense Ratio?

  • Expense Ratio if the expenses incurred for running and maintaining the scheme.
  • This includes all expenses that the scheme has incurred in running the scheme, such as, Administrative, management, advertising expenses etc.
  • An expense ratio of 1% per year means that each year 1% of the fund's total assets will be used to cover expenses.
  • So, the lower the expenses are, the better it will be for its investors.
  • Usually, a 1 to 1.5% for an Equity mutual fund under DIRECT plan is a common expense ratio.
  • The higher the AUM of the scheme, the lower the expenses will be. So, in general, it is better to invest in a higher AUM scheme over a tiny AUM scheme when considering expense ratio factor.

Why is there so muuch difference in various plans of Franklin High growth companies fund

Franklin High growth companies fund has expense ratio is 2.3% in regular plan but 1% in direct plan

This might be due to the case where most of the investors in the scheme are with DIRECT plan and very few in the REGULAR plan.

How can we get to know this?

We can get the AUM data for every scheme and plan from AMFI Website

https://www.amfiindia.com/research-information/aum-data/average-aum

Franklin India High Growth Companies Fund - Direct - Dividend 12605.49 Franklin India High Growth Companies Fund - Direct - Growth 49592.93 Franklin India High Growth Companies Fund - Dividend Plan 110607.76 Franklin India High Growth Companies Fund - Growth Plan 336012.96

From the above data, it is clear that DIRECT plans are not the core contributors of assets.

So, the next possibility is money given to distributors.

Looks like the REGULAR plan of this scheme is paying distributors well.

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