Expense ratio

How it is used

Investors compare funds by their expense ratio, for example 0.10 percent for a cheap index ETF versus 1.5 percent for an active fund. Fund documents in Europe use the term 'ongoing charges'. A small difference adds up over many years.

Example sentences

1. The ETF has an expense ratio of just 0.07 percent a year.

2. Over twenty years, a higher expense ratio can cost you a large part of your returns.

Common collocations

• low expense ratio
• high expense ratio
• total expense ratio
• compare expense ratios

Related terms

• ETFShort for exchange-traded fund: a fund that holds a basket of assets, often following an index, and whose units are bought and sold on a stock exchange like shares.
• mutual fundA fund that collects money from many investors and uses it to buy a mix of shares, bonds or other assets, managed by professionals and priced once a day.
• index fundA fund that aims to match the performance of a market index by holding the same securities in the same proportions, instead of trying to beat it.
• passive investingA strategy of buying funds that follow a market index and holding them for a long time, rather than choosing individual stocks or timing the market.
• net asset valueThe value of a fund's assets minus its liabilities, usually divided by the number of units to give the price of one unit of the fund.

More terms: Funds & ETFs

• hedge fund