Investing term
What is Expense ratio?
The annual percentage of assets a fund charges to cover management and operations.
The expense ratio is the annual percentage a fund charges to cover its management and operating costs, skimmed automatically from your money. It looks tiny but compounds relentlessly — a difference of even half a percent a year becomes large over decades. Minimizing it is one of the few things in investing fully under your control, and index funds win largely by keeping it near zero.
For example
On $100,000, a 1% expense ratio costs $1,000 a year versus $50 for a 0.05% index fund — and over 30 years that gap can swallow tens of thousands.
Expense ratio is taught hands-on in Stage 6 — Index Funds, ETFs & Mutual Funds.
See the lesson →