Expense Ratio

The Hindu Business Line  Feb 20  Comment 
Fund houses are also looking at getting more inflows through distributors. Quantum MF, for instance, said that it will now start paying distributors to sell its funds
The Economic Times  Feb 8  Comment 
In a communication to investors, the fund house said it would cut the expense ratios of its schemes as their assets under management (AUM) grow.
Motley Fool  Oct 27  Comment 
That percentage that a fund manager is required to provide that describes all the fees you’re paying? They leave some out.
The Hindu Business Line  Jun 16  Comment 
FIFA disputes US fund tracker’s assessment
Motley Fool  Apr 22  Comment 
Expense ratios for mutual funds and ETFs may sound like deductible investment expenses, but here's the real story.
The Hindu Business Line  Mar 20  Comment 
Mutual fund houses charge investors for managing their money. This, in industry parlance, is referred to as the fund’s ‘expense ratio’. Costs such as fund management fees, trustee fees, audit fee...
Motley Fool  Mar 15  Comment 
Mutual fund fees aren't always obvious.


Expense ratio is the ratio of the expenses incurred by the management in order to run an Exchange Traded Fund (ETF) or a mutual fund divided the total assets held by the fund. In other words, it is the percentage of assets taken back by the management in order to run the fund.

Generally, the major expenses incurred by the fund are the management fees, which include mostly management fees and operating expenses, if any. Due to the fact that management fees take up bulk of the expenses, this ratio is also called the Management Expense Ratio. Another significant expense is the 12b-1 fees which is classified as marketing and promotion expenses under the FINRA rules. Other miscellaneous costs could be legal fees, auditing fees, accounting or recordkeeping and taxes, amongst others[1].

On average the expense ratio of an index fund (a passively managed fund) will be far lower than an actively managed mutual fund. Index funds seek to track the performance of a benchmark index (e.g. The Vangaurd 500 Index Investor tracks the performance of the S&P 500), meaning they generally refrain from trading except to keep the fund's portfolio in line with the benchmark index. In contrast, actively managed funds have much more freedom in ability to trade, and often trade frequently in search of market beating returns. As a result, operating expenses and thus the expense ratios are often larger for actively managed funds than for index funds.


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