Does expense ratio really matter?

A mutual fund’s expense ratio is very important to investors because fund operating and management fees can have a large impact on net profitability.

Is expense ratio a big deal?

Expense ratios may not seem like a big deal initially, but they play a huge factor in the returns you’ll earn from your investments. This is even truer as you continue investing over years or decades.

What is a good expense ratio for a fund?

A good expense ratio, from the investor’s viewpoint, is around 0.5\% to 0.75\% for an actively managed portfolio. An expense ratio greater than 1.5\% is considered high. The expense ratio for mutual funds is typically higher than expense ratios for ETFs.

What is fund expense ratio?

An expense ratio reflects how much a mutual fund or an ETF (exchange-traded fund) pays for portfolio management, administration, marketing, and distribution, among other expenses. You’ll almost always see it expressed as a percentage of the fund’s average net assets (instead of a flat dollar amount).

Is a high expense ratio bad?

High expense ratios can drastically reduce your potential returns over the long term, making it imperative for long-term investors to select mutual funds and ETFs with reasonable expense ratios.

Does the expense ratio of a fund matter?

The expense ratio of a fund does matter for your returns. Remember that many popular ETFs are tracking an index using rules. For example, if the fund is tracking the S&P 500 and the company is the S&P 500 then the fund owns it according to its index weight.

What is a good expense ratio?

A good expense ratio is the best one you can get for the investment that is appropriate for you. Clearly, that’s a little vague. The point I want to make is while expense matter and you should absolutely pay attention to them, it shouldn’t be the only reason you pick a fund.

Does expense ratio matter when buying stocks?

Expense ratios matter. Cost is a significant part of evaluating an investment purchase, but it isn’t everything. Not every low cost investment is worth buying — if the stock goes bust, you’re out all of your money. But when making investment decisions, consider the cost carefully.

What is the difference between gross expense ratio and net expense ratio?

The gross expense ratio is the top-level fee. However, that isn’t always what you end up paying for gonging ownership of the fund. Mutual funds will often rebate certain amounts of the gross fee. These waivers and reimbursements reduce your cost of ownership and are reflected in the net expense ratio.