As an illustration, let us compare two mutual funds with the same gross return of 15 per cent per annum. The first has an expense ratio of 2.5 per cent per annum while the second has an expense ratio of 0.1 per cent per annum. Let us now see the impact of these expense ratios on the long-term returns generated from investing Rs 1 lakh in each of these mutual funds (see the exhibit below).
