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Does the expense ratio continue to be deducted even after an investor stops their SIP but retains the mutual fund units without redeeming them? - Anil Misra
The expense ratio is deducted as long as you hold the mutual fund units, even if you have stopped your SIP.
What is expense ratio?
The expense ratio is an annual fee charged by the mutual fund to cover management costs, administrative expenses and other operational charges. This fee is adjusted daily before the net asset value (NAV) is published, effectively reducing the NAV of your fund holdings.
When you stop a SIP, it only means that you are no longer making fresh investments in the scheme. However, the units you already own remain invested in the fund, and the fund house continues to manage them. Since mutual funds charge the expense ratio on the total assets under management, every unit holder, including those who have stopped their SIPs, shares the cost.
While you cannot avoid the expense ratio, you can optimise your returns by selecting funds with lower costs, particularly for long-term investments, where the impact of fees compounds over time.
Also read: Why mutual funds are your best bet in this market unrest
This article was originally published on March 20, 2025.
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