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Avoid paying a high expense ratio in categories where the scope for generating high outperformance doesn't exist
Former Sebi chief U K Sinha recently said that India's mutual fund industry is among the most expensive globally and there is scope for bringing down costs
The bottomline, according to experts, is that a high expense ratio is justified only in products that manage to generate high alpha
Actively-managed equity funds in India have traditionally generated high alpha
But in recent years the alpha generated in the large-cap equity segment has shrunk
Either fund houses will have to reduce expense ratios in their large-cap funds (as Edelweiss AMC has done), or investors may shift to passively managed funds
In the debt category, returns are anyway low, so investors should avoid funds with high expense ratios
Going direct is one way investors can reduce cost. The benefit ranges from 41-65 per cent across categories