Expense Ratio Definition

Expense Ratio Definition

Learn the definition of expense ratio and other ETF terminology from the etf.com glossary.

Reviewed by: etf.com Staff
Edited by: etf.com Staff

Learn more about Expense Ratio

In the context of ETFs, the expense ratio is an annual fee that is charged by an ETF issuer to cover the costs of operating the ETF. These costs can include things like management fees, marketing expenses, and administrative costs. The expense ratio is typically expressed as a percentage of the ETF's net asset value, or NAV. For example, an ETF with an expense ratio of 0.25% would charge investors 0.25% of the NAV per year, representing $25 for every $10,000 invested. The expense ratio is an important consideration for investors when choosing an ETF, as it can have a significant impact on the ETF's long-term returns. A lower expense ratio generally means that investors will keep more of their returns.

Related Terms

Net Asset Value (NAV), ETF Issuer

ETF Glossary is etf.com’s collection of key terms and definitions related to exchange-traded funds. ETFs are investment funds that are traded on stock exchanges, and they can encompass a wide range of asset classes, including stocks, bonds, commodities and more. Given the diverse range of ETFs and the complexity of financial markets, having a clear understanding of ETF-related terminology is instrumental for investors looking to make informed decisions, manage risks effectively and navigate the evolving landscape of ETF investments.