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.

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.