Ch.7 · Total Expense Ratio Limits · medium
What is the impact of TER on long-term mutual fund returns?
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EXPLANATION
TER's impact is deceptively large over long periods due to compounding. A fund earning 12% gross with 2% TER gives 10% net — vs a passive fund with 0.2% TER giving 11.8% net. Over 20 years on ₹10 lakh: 12% → ₹96L; 10% → ₹67L; 11.8% → ₹91L. The 2% annual TER difference reduces final corpus by ~30%. This is why TER comparison within a category is critical.
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