Expense Ratio
What is Expense Ratio?
The yearly fee a fund charges, as a percentage of assets.
Understanding Expense Ratio
The expense ratio covers a fund's management and operating costs. It is deducted from fund assets, so it lowers returns directly.
Small differences compound: over decades, a 1% fee can cost far more than a 0.05% one.
Example
A 0.20% expense ratio costs $20 a year on a $10,000 investment.