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Expense ratio

A fund expense ratio expresses certain annual operating expenses as a percentage of average net assets.

By Betta Signals Research Desk · Reviewed October 24, 2026

Plain-English definition: A fund expense ratio expresses certain annual operating expenses as a percentage of average net assets.[1]

How the term is used

The expense ratio is deducted within the fund rather than billed as a separate annual invoice. It does not include every possible investor cost, such as brokerage commissions, bid-ask spreads, taxes, or some transaction expenses.[2]

What to check before relying on it

Use the current prospectus figure and distinguish gross from net expenses when a temporary waiver applies. Small annual differences compound over long holding periods.

Example

A 0.25% expense ratio represents about $25 a year per $10,000 of assets before compounding and before costs outside the ratio.

Exchange-traded fund (ETF)Mutual fundProspectus

Research last reviewed: October 24, 2026. This definition is educational and does not evaluate a particular security.

Sources

  1. Investor.gov: Expense Ratio — fund operating expenses expressed relative to average net assets. Accessed October 24, 2026.
  2. Investor.gov: Characteristics of Mutual Funds and ETFs — how mutual funds and ETFs issue shares, trade, calculate NAV, and charge expenses. Accessed October 24, 2026.