Expense Ratio is the cost mutual fund charges for managing Investors’ money. Expense Ratio comprises of multiple expenses such as sales & marketing / advertising expenses, administrative expenses, transaction costs, investment management fees, registrar fees, custodian fees, audit fees. Expense ratio for regular funds is higher as compared to direct funds because if you invest in regular funds, commission is paid to the distributor through whom you have invested whereas in direct funds, no commission is involved.