Ch.7 · Total Expense Ratio Limits · easy
What is the 'expense ratio' for index funds and why is it lower than active funds?
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EXPLANATION
Index fund TER is far lower than active fund TER because: (1) No fundamental research needed — portfolio mirrors index mechanically; (2) Very low portfolio turnover — only index changes require trading; (3) Lower fund manager salaries vs active fund managers; (4) Lower distribution commissions. Nifty 50 index funds from large AMCs now charge as little as 0.05%–0.20% TER.
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