Expense Ratio

The fee that a fund you invest in charges to do what it says it’s going to do. Expense ratios on index funds are typically very low, maybe 0.25% or less. An expense ratio of 0.25% would charge you $25 per $10,000 per year. So if you have $10,000 invested in that fund, think of the $25 as a service fee for the broker managing the fund to work it for you. A 1% expense ratio (typical for actively managed funds) would charge you $100 per year on $10,000.

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