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 fund Expense ratio?

Think of the expense ratio as the management fee paid to the fund company for the benefit of owning the fund. The expense ratio is measured as a percent of your investment in the fund. For example, a fund may charge 0.30 percent. That means you’ll pay $30 per year for every $10,000 you have invested in that fund.

Why is a high expense ratio important?

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. When someone discusses how expensive a fund is, they’re referring to the expense ratio.