What is an expense ratio?

For every dollar that an individual invests into either type of investment, the firm managing the investment will charge a fee related to the costs of managing the investments, called an expense ratio. This is the cost of expenses to manage that fund and can typically range in the 0.10% to 0.75% range.

What is a mutual fund Expense ratio?

An expense ratio is the cost of owning a mutual fund or ETF. Think of the expense ratio as the management fee paid to the fund company for the benefit of owning the fund. The expense ratio is measured as a percent of your investment in the fund. For example, a fund may charge 0.30 percent.

What is the difference between total and gross expense ratios?

It's important to differentiate between the total and gross expense ratios when looking at how the fund's assets are being spent. The total expense ratio is the percentage of the fund's assets that are used to cover all management costs and other fees. This includes things like marketing and administrative costs.

Is a low expense ratio a good investment?

In general, the lower the expense ratio, the better it is for investors. Actively-managed funds will typically come with higher expense ratios, and the amount of expenses will also vary depending on the fund's strategy or asset class focus. Compare expense ratios of similar funds in order to determine what is good.