Expense Ratio

Market Structure

An expense ratio is the annual cost of owning a fund, expressed as a percentage of the fund's average net assets. It covers management fees, administration and other operating costs. It is deducted from fund assets rather than billed, so it is never a line item on a statement, and it reduces returns whether the fund gains or loses.

An ETF charging 0.03% vs. one at 0.75% may seem minor, but compounded over 20 years the difference is enormous.