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Expense Ratio The percentage of a mutual fund's assets used expressly for the purpose of administering the fund is referred to as the expense ratio. Typically this number is about 1.5 percent. This figure represents a steady expense for the fund regardless of whether the fund's investments have gone up or down on the market. In general, the trend for mutual fund expense ratios is for the percentages to climb. In other words, over time it will cost more and more to administer the business of the fund. Expense ratios are highest on actively managed funds where a financial professional and a team of researchers actively buy and sell stock, sometimes on a daily basis. Typically an expense ratio includes the fund's management fee and any administrative costs such as record keeping, mailings, and the maintenance of a customer service line, for example. The ratio will also include the 12B-1 fee which covers marketing, distribution, and advertising services. More Terms Explained here |
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