What is an expense ratio?

The fund's annual operating cost as a percentage of your investment, deducted automatically from returns.

The expense ratio is the fund's annual operating cost expressed as a percentage of assets. A 0.03% expense ratio means a $10,000 position costs about $3 per year; a 0.95% ratio costs about $95. You never receive a bill; the fee is shaved off the fund's net asset value day by day, so it quietly reduces your return.

Expense ratios vary enormously by strategy: broad index ETFs can charge 0.02–0.10%, sector and factor funds often 0.10–0.60%, and active, leveraged, or niche funds 0.50–1.00%+. Compare funds within the same strategy: a cheap S&P 500 fund and a 'cheap' single-country fund are different products.

Costs compound just like returns. Over 20 years, the difference between 0.05% and 0.75% on the same gross performance is thousands of dollars per $100,000 invested. Fees are one of the few things an investor controls completely, which is why every fund page here shows them prominently.