Expense ratio
Also called: fund fee, management fee
The expense ratio is the yearly fee a fund charges, as a percentage of the money you have in it. A 0.5% expense ratio costs $5 a year for every $1,000 invested.
The fee is taken from the fund's assets, not billed to you, so it quietly lowers your return. Over decades, a difference of 1% a year can cost a large share of your final balance.
In Journey Shares
A player who proposes an ETF earns its fund fee: 0.5% a year of what everyone holds in it, taken daily. →
Related terms
- ETF (exchange-traded fund): An ETF is a fund that holds a basket of investments, such as all the stocks in an index, and trades on an exchange like a single stock.
- Index fund: An index fund is a fund that buys every stock in a market index, such as the S&P 500, in the same proportions, so it matches the market's return instead of trying to beat it.
- Compound interest: Compound interest is interest earned on both your original money and the interest it has already earned, so savings grow faster over time.
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