Top 3 highest and lowest expense ratio small-cap mutual funds with change in TER

Small-cap mutual funds offer the potential for high growth, but expense ratios can eat into those returns. This article dives into the current landscape, revealing the top 3 small-cap mutual funds with both the highest and lowest expense ratios in April 2024.

Expense Ratio

Annual fund operating expenses, often referred to as the expense ratio, represent the percentage of a fund’s assets that go toward paying the fund manager (AMC) for maintaining the fund. The fund manager, along with a team of analysts and other experts, handles tasks like allocating investments, managing the fund (including paying auditors and advisors), and promoting it to achieve the best returns and manage risks.

When a fund has a small amount of assets, its expense ratio tends to be higher. This is because the fund must cover its expenses from a smaller pool of assets. Conversely, if a fund has a large number of assets, its expense ratio should ideally decrease.

The following table shows the highest and lowest expense ratio of small-cap mutual funds:

Investors must comprehend expense ratio changes as they directly impact the overall returns on their investments.

Firstly, the Nippon India Small Cap Fund demonstrates a notable decrease in TER from 1.64% in April 2023 to 1.49% in April 2024, indicating a reduction of 0.15%. This positions it as the fund with the lowest expense ratio among those listed.

Conversely, the HDFC Small Cap Fund experienced an increase in TER, rising from 1.17% to 1.56%, marking a substantial 0.39% increment. Similarly, the SBI Small Cap Fund witnessed a TER increase from 1.89% to 1.60%, albeit with a smaller magnitude of 0.29%.

Moreover, the Union Small Cap Fund and Bank of India Small Cap Fund also registered decreases in TER, with reductions of 0.24% and 0.30% respectively. The Union Small Cap Fund, however, retains the highest expense ratio among the listed funds, despite the decrease.

Lastly, the LIC MF Small Cap Fund’s data from April 2023 is missing, but it shows a TER of 2.50% in April 2024, indicating its expenses are relatively higher compared to others.

In summary, while some funds have managed to lower their expenses, others have experienced increases. Investors should factor in these changes along with other performance indicators before making investment decisions, ensuring they choose funds that align with their financial goals and risk tolerance.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.