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What is an example of expenditure ratio?

The gross expense ratio, net expense ratio, and post-reimbursement expense ratio are all examples of expenditure ratios. Index funds and other passively managed funds generally have lower ER than actively managed funds. Two examples are provided below, one for each.

What is an expense ratio?

An expense ratio measures how much you’ll pay over the course of a year to own a fund. A high expense ratio can significantly impact your returns, and it pays for things like the management of the fund, marketing, advertising and any other costs associated with running the fund. Both mutual funds and ETFs charge an expense ratio.

How much does a 1% expense ratio cost?

If you invest $100,000 into a fund with a 1% expense ratio, your cost for the year comes in at $1,000. If the position in your fund grows to $200,000, you will pay $2,000 in expenses for storing your money in the fund. If the fund loses value, the amount you pay in administrative fees also goes down. You won't pay this money upfront.

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