The direct plan of the Jio BlackRock Flexicap Fund that opens later this month has a total expense ratio of 0.5%. The fund house claims that its efficient execution processes would lower costs and potentially increase portfolio returns for investors. The logic seems simple: the lower the cost, the higher the returns for the investor. A fund with an expense ratio of 0.5% instead of 1% saves the investor 50 basis points annually. Over the long term, this compounding advantage can add up to a significant amount.But experts don’t agree with this line of reasoning. “Expense ratios do matter, but should not be the most important factor when choosing a fund,” says Raj Khosla, Managing Director of MyMoneyMantra. He argues that what ultimately matters is performance adjusted for risk. “The 0.5% savings on expense ratio is not as important as the difference in returns of a well-managed and poorly-managed fund. If a low-cost fund delivers 5% annualised returns while a higher-cost fund delivers 10%, an investor is far better off in the latter, despite paying more in fees,” he says.The critical metric is how well the fund manager deploys capital. A good manager’s ability to pick stocks, adjust exposure across sectors, and respond to changing macro conditions has a far bigger impact on returns than a marginally lower fee. We found that in many cases, funds with higher charges have done better than funds with lower charges (see graphic). The five large-cap funds identified below charge roughly 40 basis points more than the average large-cap fund, but have delivered returns 2-3 percentage points above the average returns in the past 3-5 years.Despite above average costs, these large cap funds have consistently outperformed the category in the past 3, 5 and seven years

Data as on 5 Sep 2025. Source: Value ResearchPerformance itself cannot be judged in isolation. A fund delivering high returns by taking reckless bets is not really worth investing in. Risk-adjusted metrics like Sharpe ratio, downside capture, and volatility are more telling than raw returns. A slightly more expensive fund that protects capital during downturns may be a far better long-term wealth builder than a cut-price fund that collapses when markets stumble.JioBlackRock Flexi Cap Fund is a new fund so there is no history to help the buyer decide. Also, it will not be the only actively managed fund with such low charges. There are more than 40 actively managed equity schemes with TER of less than 0.5%.This does not mean costs are irrelevant. In categories where returns are closely tied to the index, such as passive funds or ETFs, low charges are indeed crucial because they directly determine the tracking efficiency. But in active funds, costs are secondary. The investor’s priority should be to find a fund with consistent returns across market cycles and disciplined risk management.(Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India)