Glossary
Expense Ratio
Investing
The expense ratio is the annual percentage of assets a fund charges to cover management and operating costs.
A 0.03% expense ratio costs $3 per year on a $10,000 holding; a 0.75% ratio costs $75. The charge is deducted from fund assets daily rather than billed, so it shows up as a drag on returns rather than as a line item.
Over decades the difference compounds heavily, which is why broad index ETFs competing on cost is one of the largest drivers of long-run investor outcomes.