DayCents

Expense Ratio

An expense ratio is the annual fee a mutual fund or ETF charges, shown as a percentage of your invested money. A 0.05% ratio costs $5 a year per $10,000; a 1% ratio costs $100. It's deducted automatically, so it's easy to ignore — and over decades even small differences compound into serious money.

On a $100,000 balance over 30 years, paying 1% instead of 0.05% can cost well over $100,000 in lost growth. Low-cost index funds often charge under 0.10%, which is why fees are the one part of investing you can control and should minimize.