ATLASExpense ratio
Investing glossary · Practice and portfolio habits
The annual fee a fund charges, expressed as a percentage of the money you have invested in it.
Definition
The expense ratio is the yearly cost of owning a fund, taken from the fund's assets and expressed as a percentage. An expense ratio of 0.20% costs 2 per year for every 1,000 invested. You never see a bill: the fee is deducted from the fund's returns.
Fees matter because they compound in the wrong direction. A difference that seems tiny, such as 0.70 percentage points a year, can consume a large part of your final wealth over decades. Since index ETFs and funds are now available at very low costs, paying more needs a clear reason.
Formula
Fee paid per year = fund value × expense ratio
The fee is charged every year on the current value, so it reduces the compounding rate: net return ≈ gross return − expense ratio.
Worked example
Invest $10,000 for 30 years at a gross return of 6% a year. With an expense ratio of 0.05% it grows to about $56,628; with an expense ratio of 0.75% it grows to about $46,416. The difference in fees alone costs about $10,212.
The numbers are illustrative: they show how a seemingly small fee gap compounds into a large amount.
How ATLAS uses it
ATLAS shows information about ETFs, including their cost, so you can compare funds that track similar indices.
Related in ATLAS: ETFs →Browse all ATLAS tools →Frequently asked questions
What is a low expense ratio?
For broad index ETFs, well below 0.20% a year is common; actively managed funds often charge several times that.
Are there other costs besides the expense ratio?
Yes: trading commissions, the bid-ask spread and taxes. The expense ratio is only the fund's ongoing management cost.
Related terms
Put the idea to work on your own stocks
Open any company in ATLAS to see its fair value, its odds of rising and its risk numbers side by side.
Try ATLAS →Not investment advice. ATLAS estimates are produced by statistical models from public data; they can be wrong and past performance does not predict future results. Consider your own situation before investing. Disclaimer