What is an expense ratio? An expense ratio measures how much you’ll pay over the course of a year to own a fund. A high expense ratio can significantly impact your returns, and it pays for things like the management of the fund, marketing, advertising and any other costs associated with running the fund. Both mutual funds and ETFs charge an expense ratio. What is a gross expense ratio? The gross expense ratio is just the percentage of the fund's assets that are used to cover the fund manager's salary and other operational costs. So, why is this distinction important? Well, it's helpful to know how much of the investment is actually going towards the management of the fund. What is the expense ratio of a stock or asset fund? The expense ratio of a stock or asset fund is the total percentage of fund assets used for administrative, management, advertising (12b-1), and all other expenses. An expense ratio of 1% per annum means that each year 1% of the fund's total assets will be used to cover expenses. How much does a 1% expense ratio cost? If you invest $100,000 into a fund with a 1% expense ratio, your cost for the year comes in at $1,000. If the position in your fund grows to $200,000, you will pay $2,000 in expenses for storing your money in the fund. If the fund loses value, the amount you pay in administrative fees also goes down. You won't pay this money upfront.