What is an expense ratio?

Sam Edwards/Getty Images An expense ratio is the amount that an investment company charges investors to manage an investment portfolio, a mutual fund, or an exchange-traded fund (ETF). The ratio represents all of the management fees and operating costs of the fund.

What is a good mutual fund Expense ratio?

Mutual funds that actively buy and sell securities will typically carry expense ratios between 0.50% and 1.50%. Some actively managed funds that employ options and other high-cost hedging strategies have higher fund expense ratios, though it’s rare to see a ratio north of 2.50%.

Why should you compare mutual fund Expense ratios?

Comparing expense ratios can help you make more informed decisions, potentially helping you find funds that offer competitive returns while having lower costs. The mutual fund expense ratio is the percentage of a fund's assets that are used for administration, management, and all other expenses.