The expense ratio tells you how much of a fund’s assets go to fees each year. A 1 percent expense ratio means roughly one birr in every hundred under management pays for running the fund. Over long periods, higher fees compound into a large gap versus a cheaper alternative with similar returns.
Key takeaways
- Lower expense ratios leave more of the market return in your pocket.
- Compare fees only among funds with similar strategies and risk.
- Trading costs inside the fund may sit outside the published expense ratio.
- A slightly higher fee can be justified only by durable, proven value, which is rare.