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The expense ratio is the annual fee charged by a fund (like a mutual fund or ETF) for managing your investment, expressed as a percentage of your total investment.
In Depth
This fee covers the fund's operating costs, like management fees and administrative expenses. It's deducted from the fund's assets, meaning it reduces your investment returns. A lower expense ratio generally means more of your money stays invested and grows over time. It's an important factor to consider when choosing investment funds.
Example
If a fund has an expense ratio of 0.50% and you have $10,000 invested, you'd pay $50 in fees that year.