Expense Ratio
The annual fee a mutual fund or ETF charges, expressed as a percentage of your invested balance.
What does expense ratio mean?
Because it’s charged on your whole balance every year, even a small expense ratio compounds into a large drag over decades. Broad index funds often charge under 0.10%, while active funds can exceed 1%.
Put it to use
Mutual Fund Expense Calculator This calculator can help you analyze the costs associated with buying shares in a mutual fund. By entering a few pieces of information, found in your fund's prospectus, you can see the impact of fees and operating expenses on your investment. Compare Investment Fees Even a small difference in the fees you pay on your investments can add up over time. Use this calculator to see how different fees impact your investment strategy!
Related terms
Expense Ratio — frequently asked
How much does an expense ratio actually cost me?
It is an annual percentage skimmed from the fund’s assets. A 0.50% ratio costs $50 a year per $10,000 invested — small yearly, but over decades a high ratio can quietly erase tens of thousands in compounded returns.
What is a good expense ratio?
For broad index funds, look for 0.20% or lower — many top ones are under 0.10%. Anything approaching 1% is expensive by today’s standards and hard to justify unless the fund reliably outperforms after fees.