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Glossary Finance

Expense ratio

The expense ratio is the yearly fee a fund charges, expressed as a percentage of the money you have invested in it.

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In more detail

The fee is taken from returns automatically, and it compounds. On $10,000 growing at 7% for 30 years, a 0.1% fee ends near $78,780 while a 1% fee ends near $60,226.

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Project a mutual fund's future value net of its expense ratio and front-load or back-load sales fees.

See also

  • Glossary Mutual fund
    A mutual fund pools money from many investors to buy a diversified portfolio of shares, bonds or other assets run by a manager.
  • Glossary Compound interest
    Compound interest is interest calculated on the original amount plus all the interest already added, so growth builds on itself.
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