What is the expense ratio (TER), and how much does it actually cost me?

The Total Expense Ratio is the fund's annual running fee, and it is charged out of the fund's NAV every day rather than billed to your bank account — so you never watch it leave, but it has already been subtracted from every return you are quoted. A 1.5% TER on a ₹10 lakh holding is about ₹15,000 a year, deducted whether the fund rose or fell.

It matters more than its size suggests, because fees compound against you exactly as returns compound for you. Across a two-decade SIP, the gap between a 0.5% and a 1.5% fee quietly diverts a meaningful share of the final corpus to the fund house. It is also the entire argument for direct plans over regular ones: the same fund, same manager and same portfolio, minus the distributor commission that is permanently baked into a regular plan's fee.

Cheapest isn't automatically best for an active fund — there you are paying for a manager who may or may not earn the fee. But for index funds, where every fund tracks the same basket of companies, cost and tracking accuracy are close to the only things separating them, so the fee is the decision. The live list below ranks funds by lowest TER and refreshes with our data.