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Expense Ratio

Expense ratio is the yearly percentage fee a fund charges to operate and manage the fund.

Why this matters

Even small fee differences can compound into large gaps in long-term portfolio value.

Simple example

A 0.10% expense ratio means about $1 per year for every $1,000 invested.

Common mistakes

  • Comparing funds without comparing fees.
  • Assuming high fees guarantee better performance.
  • Ignoring total cost when funds look similar.

Related terms

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Frequently Asked Questions

What does Expense Ratio mean?

Expense ratio is the yearly percentage fee a fund charges to operate and manage the fund.

Why does Expense Ratio matter?

Even small fee differences can compound into large gaps in long-term portfolio value.

What is a simple example of Expense Ratio?

A 0.10% expense ratio means about $1 per year for every $1,000 invested.

What is a common mistake with Expense Ratio?

Common mistakes include: Comparing funds without comparing fees. Assuming high fees guarantee better performance. Ignoring total cost when funds look similar.