Every mutual fund house incurs expenses. Mutual fund schemes are permitted to deduct these expenses from a portion of the investment assets held by it. Equity funds are allowed to charge up to 2.5% of the assets that a scheme manages; debt funds’ expenses are capped at 2.25%. Ideally, the lower the expense, the better it is as expenses reduce fund returns. But a low expense ratio is just one of the many parameters that investors should look at.