What is Expense ratio?
The expense ratio is the yearly cost of running a fund, shown as a percentage of the money invested in it. It is taken out of the fund's assets, so you never see a bill, only a slightly lower return. In Canada the same idea is called the management expense ratio, or MER, and in the UK the closest figure is the ongoing charges figure, or OCF.
Why Expense ratio matters
It is charged every year whether the fund does well or badly, and it compounds against you over time.
Related terms
Lessons that use this term
- Investment fees: expense ratios, MERs and what they cost you
- Index funds explained: what they are and how they work