Expense ratio

The cost of owning a slice of a mutual fund. The expense ratio is a measure of how much of a fund’s assets it takes to manage and operate the fund expressed as a percentage. This includes all administrative expenses to buy and sell the underlying stocks, the costs of marketing the fund and the management fees going to the fund manager. Actively managed funds tend to have expense ratios of 1.5% to 2% dropping to around 0.25% for index funds. Expense ratios are different to the costs involved in actually buying a fund.

This definition is for general information purposes only