What is a good expense ratio for an ETF or mutual fund?

A good expense ratio for an ETF or mutual fund is generally considered to be below 0.20% for broad market index funds and ETFs. For actively managed funds, anything below 0.50% is considered very competitive, though many passive options exist below 0.10%.

How often are expense ratios charged?

Expense ratios are calculated and accrued daily, then deducted from the fund's assets throughout the year. This means the reported returns of a fund are already net of the expense ratio.

Do all investment funds have an expense ratio?

Most pooled investment vehicles, such as mutual funds, ETFs, and closed-end funds, have an expense ratio. Individual stocks or bonds purchased directly do not have an expense ratio, but they may incur trading commissions.

Can expense ratios change over time?

Yes, expense ratios can change. Fund companies may adjust them based on competitive pressures, changes in operational costs, or if fee waivers expire. Always check the most current prospectus or fund fact sheet for the latest expense ratio.

Are expense ratios tax-deductible?

For individual investors, investment expenses, including expense ratios, are generally not tax-deductible as of 2026 due to changes in tax law (specifically, the suspension of miscellaneous itemized deductions). This means the cost directly reduces your investment return.

What is the difference between an expense ratio and a load fee?

The expense ratio is an annual operating fee deducted from the fund's assets, while a load fee is a sales commission paid to a broker when you buy (front-end load) or sell (back-end load) shares of a mutual fund. ETFs typically do not have load fees.

Should I choose a fund with a 0% expense ratio?

While a 0% expense ratio is very attractive, always investigate how the fund company makes money. These funds often generate revenue through other means, such as securities lending or by attracting assets to their broader platform. Ensure the fund aligns with your investment goals and that there are no hidden costs or limitations.

Expense Ratio Guide: Understanding Investment Fees | One…