Expense Ratio (Investing)
InvestingGlossary term
Definition
The annual percentage of fund assets charged to cover management fees, administrative costs, and other operating expenses. A fund with a 0.50% expense ratio charges $50 annually per $10,000 invested. Lower expense ratios directly improve long-term returns.
Related terms
- Mutual FundAn investment vehicle that pools money from multiple investors to purchase a diversified portfolio of stocks, bonds, or other securities, professionally managed by a fund manager.
- Passive InvestingAn investment strategy that aims to match market returns rather than beat them, typically through index funds and ETFs. Passive investing relies on broad diversification and low costs, and research shows it outperforms most active managers over long periods.
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