Expense Ratio
investmentAlso known as: expense ratio, fund expense ratio, OER, operating expense ratio
Updated · Written and reviewed by Konstantin Iakovlev
Detailed explanation
Charged automatically — never appears as a line item, just reduces NAV daily. A 1% expense ratio on a $500K balance = $5,000/year. Over 30 years at 7% gross, switching from 1% to 0.05% adds roughly 25% to ending balance. Vanguard and Fidelity drove costs to near-zero in 2018-2019 ("zero-fee" Fidelity ZERO funds, 0% Vanguard mutual fund minimums). Index ETF leaders: VTI 0.03%, VOO 0.03%, BND 0.03%. Active fund averages: ~0.66% (US large-cap equity). 401(k) plans often have higher-cost share classes — ask HR if institutional or admiral-class shares are available. Transparency required by SEC; disclosed in fund prospectus.
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