Expense Ratio
A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual calculation, where a fund's operating expenses are divided by the average dollar value of its assets under management. Operating expenses are taken out of a fund's assets and lower the return to a fund's investors.
Also know as "management expense ratio" (MER). Investopedia Says:
Fund operating expenses vary widely depending on the type of fund. The largest component of operating expense is the fee paid to a fund's investment manager/advisor. Other costs include recordkeeping, custodial services, taxes, legal expenses, and accounting and auditing fees. Some funds have a marketing cost referred to as a 12b-1 fee, which would also be included in operating expenses. Curiously, a fund's trading activity - the buying and selling of portfolio securities - is not included in the calculation of the expense ratio.
Costs associated with mutual funds but not included in operating expense are loads and redemption fees, which, if they apply, are paid directly by fund investors. Related Terms:
12B-1 Fees
Acquired Fund Fees And Expenses - AFFE
After Reimbursement Expense Ratio
Before Reimbursement Expense Ratio
Contingent Deferred Sales Charge - CDSC
Foregone Earnings
Operating Expense
Service Shares
Total Expense Ratio - TER
Turnover Ratio |