RupeeCase
Education . MF Cost Stack . 2 of 3
The Stack
Three lines. One TER. One drag you cannot see.
Pulled the AMFI factsheet for an average regular-plan large-cap active equity scheme. Walked the cost downward. Here is what that 178 bps actually breaks into before tax.
Working assumption
Rs 10 lakh . held 1 year
Regular-plan diversified equity MF. Industry-typical 30 percent annual portfolio turnover. Pre-tax view.
What 178 bps is actually made of
01
Total Expense Ratio . 1.65 percent
The line they print. Pays the AMC, distributor, brand spend, marketing.
02
Portfolio churn . 0.13 percent
Brokerage, STT, impact cost on the fund's own buys and sells. Sits inside NAV. Never appears on the factsheet.
03
Cash drag plus tracking gap
The bit between gross alpha and what arrives in your statement. Small per year. Compounds loud.
Pre-tax annual drag
Roughly
178 bps
a year before LTCG ever shows up at exit.
178
bps