What is base total expense ratio in mutual fund?

The Base Total Expense Ratio (TER) is basically the annual fee you pay for owning a mutual fund, expressed as a percentage of the fund's assets. It includes: Management fees Administrative costs Marketing expenses (12b-1 fees) Other operational costsFor example, if a fund has 1.5% TER and you invest ₹1,00,000, you'll pay ₹1,500 annually regardless of whether the fund makes or loses money. This is deducted from the fund's assets before calculating NAV, so you don't see a separate bill. Lower TERs are generally better, especially for index funds where you're not paying for active management. SEBI has capped TERs at 2.25% for equity funds in India.

Think of TER as the "maintenance cost" of your mutual fund investment. It's crucial because it directly impacts your returns over time. A 1% difference in TER might not seem like much, but over 20 years, it can reduce your final corpus by 15-20% due to compounding! Always check the TER in the fund's fact sheet. Index funds typically have lower TERs (0.1-0.5%) since they're passively managed, while actively managed funds have higher TERs (1-2%) because you're paying for the fund manager's expertise. The SEBI website has detailed guidelines on how TER is calculated if you want the regulatory perspective.