Mutual Funds With the Highest Expense Ratios : Expense ratio is one of the most overlooked factors in mutual fund investing, yet it has the power to make or break long-term returns. Most investors compare past performance, check risk levels, and look at star ratings—but rarely notice the actual cost they pay every single year to stay invested. This seemingly small percentage deducted quietly in the background, can dramatically reduce wealth over long horizons.
In India, several mutual funds charge significantly higher expense ratios than their category averages. While a typical direct equity mutual fund charges around 0.5% per year, some funds charge more than 2%, and in a few cases, over 2.5%. These high-cost funds consistently eat into investor returns, especially when performance does not justify the fee.
In this report, we examined the 10 mutual funds in India with the highest expense ratios, ranging from 1.95% to 2.57%, and analysed their objectives, returns, risks, and suitability. The findings reveal how expensive some schemes really are, and why investors must pay attention to this critical but often ignored metric.
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How We Identified These High-Cost Mutual Funds
To maintain transparency and ensure accurate comparisons, a clear filtering method was followed:
1. Only equity mutual funds in India were considered – since equity funds typically charge higher fees compared to debt funds.
2. Only direct plans were evaluated – because direct plans already have lower expense ratios than regular plans. If direct plans are costly, regular plans will be even more expensive.
3. Funds were sorted based on their expense ratios, from highest to lowest.
4. Top 10 schemes were selected, all of which charge between 1.95% and 2.57%.
This approach ensures that the list purely reflects the highest-cost equity funds available to investors as of 15 November 2025.
Why High Expense Ratios Matter More Than Investors Realise
A higher expense ratio directly cuts into your returns. Even a difference of 1% or 2% may look small at first, but over 10–20 years, it compounds into a massive loss of potential wealth.
Let’s break this down with a simple example:
Scenario Comparison
- Typical direct equity fund expense ratio: 0.5%
- High-cost fund expense ratio: 2.5%
- Annual difference: 2%
Now assume you invest ₹10 lakhs for 10 years.With a normal expense ratio (0.5%) and assumed returns of 12%
Final value ≈ ₹31.06 lakhs
With a high expense ratio (2.5%) and net returns of 10%
Final value ≈ ₹25.93 lakhs
Wealth lost because of higher charges: ₹5+ lakhs
Over 20 years, this gap widens dramatically, often crossing ₹15–20 lakhs or more.
This example makes one thing very clear:
High expense ratios silently and consistently erode wealth—sometimes more than market corrections or poor returns.
List of 10 Mutual Funds With the Highest Expense Ratios (1.95% to 2.57%)
| S No | Fund Name | Expense Ratio (%) |
|---|---|---|
| 1 | Taurus Flexi Cap Fund | 2.57 |
| 2 | Motilal Oswal Active Momentum Fund | 2.56 |
| 3 | Motilal Oswal Special Opportunities Fund | 2.56 |
| 4 | Motilal Oswal Infrastructure Fund | 2.51 |
| 5 | Motilal Oswal Services Fund | 2.49 |
| 6 | Taurus Large Cap Fund | 2.41 |
| 7 | Taurus Mid Cap Fund | 2.13 |
| 8 | Aditya Birla Sun Life International Equity Fund | 2.08 |
| 9 | Tata Children’s Fund | 2.07 |
| 10 | Taurus Infrastructure Fund | 1.95 |
Detailed Analysis of Each High-Cost Mutual Fund
Below is a deeper look at the top 10 funds with the highest expense ratios—covering their objectives, returns, risks, and ideal investors.
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Taurus Flexi Cap Fund
- Expense Ratio: 2.57%
- Minimum Investment: ₹500
- Exit Load: 1% (within 365 days)
Objective
This fund invests across large-cap, mid-cap, and small-cap companies, aiming to capture growth opportunities irrespective of market cycle.
Returns
- 3-Year CAGR: 14.1%
- 5-Year CAGR: 15.9%
- 10-Year CAGR: 10.5%
Who Should Invest?
Suitable for investors wanting diversified exposure but who can tolerate higher costs and moderate risk.
Risks
Multi-cap volatility
High expense ratio reduces long-term profits
Motilal Oswal Active Momentum Fund
- Expense Ratio: 2.56%
- Minimum Investment: ₹500
- Exit Load: 1% (90 days)
Objective
A momentum-based strategy focused on stocks showing strong price trends.
Returns
Fund launched less than 3 years ago, so no long-term performance data is available.
Who Should Invest?
Aggressive investors comfortable with trend-based, high-risk strategies.
Risks
High volatility
Dependence on momentum cycles
No historical performance
Motilal Oswal Special Opportunities Fund
- Expense Ratio: 2.56%
- Minimum Investment: ₹500
- Exit Load: 1% (90 days)
Objective
Targets companies involved in special situations—such as mergers, restructuring, or cyclic rebounds.
Returns
Performance history unavailable (fund < 3 years old)
Who Should Invest?
Investors seeking thematic exposure and potential value unlocking events.
Risks
High thematic concentration
Lack of long-term track record
Motilal Oswal Infrastructure Fund
- Expense Ratio: 2.51%
- Minimum Investment: ₹500
- Exit Load: 1% (90 days)
Objective
Invests in companies related to infrastructure—such as power, cement, capital goods, and construction.
Returns
Launched recently and has no long-term data.
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Who Should Invest?
Investors bullish on India’s long-term infrastructure growth story.
Risks
Sector-specific risks
Dependence on government policies
Motilal Oswal Services Fund
- Expense Ratio: 2.49%
- Minimum Investment: ₹500
- Exit Load: 1% (90 days)
Objective
Focus on India’s services-driven sectors such as telecom, IT, finance, retail, and other high-growth segments.
Returns
No long-term performance data (fund < 3 years old)
Who Should Invest?
Investors seeking exposure to India’s services economy.
Risks
High sector volatility
Limited performance history
Taurus Large Cap Fund
- Expense Ratio: 2.41%
- Minimum Investment: ₹500
- Exit Load: 1% (365 days)
Objective
Invests mainly in large-cap companies with stable fundamentals and established market presence.
Returns
- 3-Year CAGR: 14.1%
- 5-Year CAGR: 15.9%
- 10-Year CAGR: 10.9%
Who Should Invest?
Investors seeking stability instead of aggressive growth.
Risks
Historically underperformed many peers
High fees reduce net returns
Taurus Mid Cap Fund
- Expense Ratio: 2.13%
- Minimum Investment: ₹500
- Exit Load: 1% (365 days)
Objective
Focuses on mid-sized companies with high growth potential.
Returns
- 3-Year CAGR: 18.4%
- 5-Year CAGR: 20.6%
- 10-Year CAGR: 15.8%
Who Should Invest?
Ideal for investors with a long-term horizon and high risk tolerance.
Risks
Mid-cap volatility
High expense ratio reduces compounding
Aditya Birla Sun Life International Equity Fund
- Expense Ratio: 2.08%
- Minimum Investment: ₹1,000
- Exit Load: 1% (30 days)
Objective
Provides exposure to international markets, offering geographical diversification.
Returns
- 3-Year CAGR: 15.9%
- 5-Year CAGR: 12.4%
- 10-Year CAGR: 11.3%
Who Should Invest?
Investors seeking global equity exposure.
Risks
Currency fluctuations
Geopolitical uncertainties
Tata Children’s Fund
- Expense Ratio: 2.07%
- Minimum Investment: ₹500
- Exit Load: 1% (18 days)
Objective
Designed for long-term wealth creation for children, with multi-cap exposure.
Returns
- 3-Year CAGR: 13.6%
- 5-Year CAGR: 17.2%
- 10-Year CAGR: 12.4%
Who Should Invest?
Parents planning for milestones like education or marriage.
Risks
Market volatility
High cost reduces long-term compounding
Taurus Infrastructure Fund
- Expense Ratio: 1.95%
- Minimum Investment: ₹500
- Exit Load: 1% (365 days)
Objective
Invests in infrastructure-focused companies.
Returns
- 3-Year CAGR: 19.6%
- 5-Year CAGR: 23.1%
- 10-Year CAGR: 16.1%
Who Should Invest?
Investors confident about India’s infra growth across roads, housing, power, and public development.
Risks
High sector concentration
Impacted by policy changes and economic cycles
Key Insights From the Analysis
The top three funds charging above 2.5% have no long-term performance history, making them high-risk despite high fees.
Taurus mutual funds dominate the high-cost list, with multiple schemes charging well above 2%.
Some expensive funds—such as Taurus Mid Cap Fund and Taurus Infrastructure Fund—have delivered strong returns, although the costs remain high.
Expense ratio alone should not be the only deciding factor, but it must be compared with performance and category averages.
Conclusion
High expense ratios can have a massive impact on long-term wealth creation. While a few high-cost funds deliver strong performance, many others do not justify the steep charges.
If a fund charges more than 2% and still underperforms its peers, it may be wise to switch to a low-cost alternative.
Investors should always compare:
- Returns
- Volatility
- Category performance
- Expense ratio
before committing long-term money.
FAQs
1. What is considered a high expense ratio in mutual funds?
In India, a typical direct equity fund charges around 0.5% to 1%. Anything above 1.5% is considered high, and funds charging 2% to 2.5%+ fall into the very high range.
2. Do higher expense ratios always mean better performance?
No. A high expense ratio does not guarantee superior performance. In fact, many high-cost funds underperform their category averages. Investors must compare actual returns, not just rely on branding or themes.
3. Should investors avoid all funds with high expense ratios?
Not necessarily. Some high-cost funds—like mid-cap or infrastructure funds—have delivered strong long-term returns. However, if a high-cost fund consistently underperforms, it is better to switch to a low-cost alternative.
4. How do expense ratios affect long-term wealth?
Expense ratios are deducted every year from your investment. Over 10–20 years, even a 1–2% difference leads to a loss of lakhs of rupees, significantly reducing the compounding benefit.
5. Are regular plans more expensive than direct plans?
Yes. Regular plans include distributor commissions and can be 0.5% to 1% more expensive than direct plans. If the direct plan expense ratio is already high, the regular plan will be even costlier.
Note: All details in this article 10 Mutual Funds With the Highest Expense Ratios: Here’s How Expense Ratios as High as 2.57% Can Drain Your Returns Over Time is completely for education purpose please before buying anything consider your legal advisor.
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Ajay Yadav is a financial writer who simplifies money, savings, and investing for everyday readers. He creates easy-to-understand content that helps people make smarter financial decisions and build long-term wealth.
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