What does an expense ratio of .20 mean?

Expense ratios are usually represented as a percentage. These funds will be deducted from your expenses over time, so you won't be able to avoid paying them. An expense ratio is the cost of owning a mutual fund or an exchange-traded fund (ETF). Think of the expense ratio as the management fee paid to the fund company for the benefit of owning the fund.

An expense ratio reveals the amount an investment firm charges investors to manage an investment portfolio, investment fund, or exchange-traded fund (ETF). While an expense ratio may seem like a small, one-time annual expense, your investment portfolio takes a double whammy. An expense ratio is a fee that an investor pays annually to invest in an investment fund or ETF (exchange-traded fund). When comparing investments, keep in mind that there is no one-size-fits-all approach to mutual funds and ETFs, and expense ratios are just one component of an investment.

As a general rule, mutual funds that invest in large companies should have an expense ratio of no more than 1%, while a fund that focuses on small companies or international stocks should have an expense ratio of less than 1.25%. Whatever your choice, make sure you understand the impact of spending ratios on your investments and that you know if you're willing to shoulder the cost burden in exchange for the benefits you seek. A fund's expenses will be listed in its prospectus and on the company's website, and can be found on many financial websites. Over the course of an investment career, a low spending rate could easily save you tens of thousands of dollars, if not more.

Expense ratios, which are expressed as percentages, represent the proportion of an individual's total investment that is deducted annually to help pay for the administration and administration of the fund. In the case of actively managed funds, the expense ratio compensates fund managers for overseeing the fund's investments and managing the overall investment strategy. Expense ratios vary widely between funds, but are generally lower than ever in general, as increased competition between funds has caused the ratios to fall over time, while investment in funds has gained popularity.