Plain-English definitions, reviewed by an independent investor

Expense Ratio

The expense ratio is the annual fee a fund charges, taken from your returns as a percentage.

The expense ratio is the annual fee a fund charges, taken from your returns as a percentage.

Expense Ratio = Fund Costs ÷ Average Assets × 100%

Why it matters

It is the silent tax on investing; over decades it compounds against you.

Common confusion

A low fee is not automatically the best fund; compare it with what you actually get.

Definitions reviewed by the Investing Glossary editorial team.

Frequently Asked Questions

What is a good expense ratio?

Broad index ETFs often sit under 0.10%; anything above 1% deserves scrutiny.

Is the expense ratio deducted from my account?

Not as a bill — it is shaved from fund returns automatically.

Related