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