List Of Funds With the Lowest Expense Ratio In India

Last Updated: 25 Jun 2025

We all want the best mutual fund, but no one wants to pay a fortune in fees to get there. That’s where the lowest expense ratio mutual funds come into play. If you’re hunting for low cost mutual funds that don’t eat into your returns, you’ve landed on the right blog. Today, we’re diving into the details of the mutual fund expense ratio list, what expense ratios even mean, and how they can quietly affect your long-term wealth.

What is an Expense Ratio?

Think of an expense ratio like a subscription fee, but for your mutual fund. It’s the percentage of your investment that the fund house charges you every year for managing your money. For example, if a fund has an expense ratio of 1%, and you’ve invested ₹1,00,000, you’ll pay ₹1,000 annually, whether or not the fund makes money.

Here’s a quick snapshot:

Component	What it Covers
Fund Management Fees	Charges for professional fund management
Administrative Costs	Paperwork, record keeping, etc.
Distribution Charges	Costs for promoting and distributing the fund

So, the lower the expense ratio, the more money stays in your pocket. That’s why the lowest expense ratio mutual funds are such a big deal for savvy investors.

Benefits of Choosing Low Expense Ratio Funds

You might be thinking, does 0.5% really make a difference? The short answer is yes. Over the years, even a tiny reduction in costs can compound into a big chunk of your returns.

Here’s why going for low cost mutual funds is a smart move:

• Higher returns: Lower fees mean higher take-home gains.
  
• Peace of mind: You’re not losing sleep over high deductions.
  
• Better compounding: The money saved adds to your principal, which compounds over time.
  
• Ideal for long-term goals: Especially helpful in retirement or child education funds.
  

To prove this, check out this example:

Investment Value	Fund A (1.5% ER)	Fund B (0.5% ER)	Difference in 10 Years
₹10,00,000	₹18,64,388	₹19,53,180	₹88,792

Assuming a 10% annual return before expenses.

Hidden Investment Fees: What Your TER Doesn’t Tell You

There are some sneaky charges not included in the official “expense ratio” label. Knowing these helps you make smarter decisions. Here’s a list of what might fly under the radar:

• Exit Load: A fee if you exit the fund within a certain time frame.
  
• Transaction Charges: Often applied when you invest more than ₹10,000 in a lump sum.
  
• Taxes: Like STT (Securities Transaction Tax) and capital gains tax.
  
• Hidden Charges: Some distributors may add service fees without you even noticing!
  

So, while picking from a mutual fund expense ratio list, always look at the total cost of ownership.

How to Invest in Low Expense Ratio Funds

If you’re ready to jump into the lowest expense ratio mutual funds, here’s your 4-step plan:

1. Do Your Homework

Check out lists online or use reputable platforms that show detailed fund data.

2. Compare Direct vs. Regular Plans

Direct plans usually have lower expense ratios than regular plans (since no agent commission is involved).

3. Look for Index or Passive Funds

Funds like Nifty 50 or Sensex index funds often come with super-low expense ratios.

4. Track the Fund Consistently

 Even low cost mutual funds need regular tracking. Expenses may change.

Tax Implications in Low Expense Ratio Funds

Taxes on your mutual fund gains depend on two things: the type of fund and how long you hold it. Here’s a quick guide:

Fund Type	Holding Period	Tax Rate (2025)	Tax-Free Limit
Equity Mutual Funds	<12 months (STCG)	20%	None
	≥12 months (LTCG)	12.5% above ₹1.25 lakh	₹1.25 lakh
Debt Mutual Funds	<36 months (STCG)	Your income tax slab	None
	≥36 months (LTCG)	12.5%	None

• Indexation (adjusting for inflation) is gone for both equity and debt funds, so you pay tax on the full gain.
• For hybrid funds, tax rules depend on whether they’re equity- or debt-oriented, but the same basic logic applies.

How To Reduce The Expense Ratio Of Your Fund Holdings?

One thing that is clear from the above illustration is that lower expense ratio means lower costs and higher returns. Even a 1% difference in costs can make a big difference to the eventual corpus. How can you consciously lower your expense ratio. Here are 3 ways.

1. Firstly you can choose funds with the lowest expense ratio in that class. The data is available with the fund and also with AMFI.
2. You can adopt a passive approach to investing. Index funds and ETFs have a much lower expense ratio since they have to spend on active management.
3. Lastly, you can opt for Direct Plans instead of Regular Plans. This way, you don’t have to pay the marketing and commission costs and that reduces expense ratio.

What Did Warren Buffett Say About Importance Of Expense Ratios?

Writing in his now famous letter to shareholders in 2016, Warren Buffett richly appreciated lauded the role played by Sir John Bogle, founder of Vanguard Funds in creating wealth. According, to Buffett, Bogle had shown that it was possible to create massive wealth by just managing the expense ratios. Is it not surprising coming from a top quality stock picker and active investor like Buffett. Here is the wisdom in the argument.

Vanguard has been a passive investor in the sense it never gets into stock selection. Vanguard funds are based on the belief that it is hard to beat the market and much harder to select funds that beat the market. Hence Vanguard just focuses on investing in good indices which can give solid equity returns with minimal risk and very low costs. As said earlier, index funds don’t need to manage money actively, so costs are lower. According to a study on index funds, Vanguard alone had saved over $600 billion for mutual fund investors since its inception.

Conclusion

Every rupee you save in fees is a rupee that gets to grow for you. By investing in the lowest expense ratio mutual funds, you’re not only cutting down on costs but also unlocking the power of smart, long-term investing. You don’t need to be a finance guru. Just choose wisely, compare your options, and track your investments. It’s all about keeping more of what you earn.

Now that you know how to spot the lowest expense ratio mutual funds, it’s time to put that knowledge to work. Don’t let hidden costs eat away at your wealth. Choose smart. Stay invested.

Frequently Asked Questions

Q1. What is considered a low expense ratio for a mutual fund?

Anything below 0.5% for index funds or below 1% for actively managed funds is generally considered low.

Q2. Are direct mutual funds always better due to lower expense ratios?

Not always, but mostly yes. Direct plans avoid distributor fees, so they often have better returns over time.

Q3. Can expense ratios change over time?

Yes. Fund houses can revise the expense ratio based on performance, AUM, or other internal changes. Always review periodically.

Q4. Should I only pick funds based on expense ratio?

No. Look at past performance, fund manager, portfolio quality, and your own investment goal. The expense ratio is just one (important) factor.