GLOSSARY · INVESTING
Expense ratio
The share of a fund's assets taken each year to pay for running it, stated as a yearly percentage in the prospectus fee table. It is deducted from the fund's value, so it never appears as a bill, but it lowers the return you keep every year and compounds over time. Trading costs inside the fund and sales charges are separate and come on top.
Also called: fund expense ratio, annual fund operating expenses, fund fee, management fee, ongoing charge
FORMULA
Return you keep ≈ return before costs − expense ratio
COMPUTE IT WITH YOUR NUMBERS
LEARN IT PROPERLY
CHAPTER · INVESTMENT FOUNDATIONS · FOUNDATIONSHow Compound Growth Builds WealthCHAPTER · INVESTMENT FOUNDATIONS · FOUNDATIONSGetting Started: Accounts, Funds and a First InvestmentRELATED TERMS
SOURCES
- Mutual Fund Fees and Expenses. U.S. Securities and Exchange Commission, Investor.gov.
- A Look at 401(k) Plan Fees. U.S. Department of Labor, Employee Benefits Security Administration.