Skip to content
GetProfitable
Search
Dictionary

Total expense ratio

The annual running cost of a fund expressed as a percentage of assets, covering management, administration, custody and audit. It is accrued daily and taken out of net asset value.

A 0.40% TER on a $50,000 holding costs $200 a year, deducted invisibly rather than billed. Because it is charged on assets rather than on returns, it is paid in losing years too.

TER is not total cost. It generally excludes the fund's own trading commissions and spreads, any performance fee arrangements, and entry or exit charges. Two funds with identical TERs can differ by 30 basis points a year once turnover costs are included, which is why tracking-difference is the better comparison for index products.

Compounded, the difference is large. Over 30 years at an 8% gross return, $100,000 grows to roughly $906,000 at 0.10% and to $761,000 at 0.70%. See fee-drag.

Related: fee-drag, management-fee, tracking-difference, performance-fee, index-fund

Educational only, not advice. Spotted an error? Post in Site Feedback.