What is expense ratio?
Expense Ratio is a metric used to measure how much of an investment's total return is taken up by the fund's operating costs. It is expressed as a percentage of the fund's total assets and reflects all operating costs, including management fees, administrative costs, custodial charges and other miscellaneous expenses.
How expense ratio is calculated?
Expense Ratio is calculated by dividing the fund's operating expenses by its average net assets. Generally, lower expense ratios are associated with better performance as fewer funds are siphoned away from the investment returns. When comparing two funds, a higher ratio does not necessarily signify that one is better than another; other factors must also be considered when selecting which will best meet your needs.
What is the difference between expense ratio and management fees
Expense ratios and management fees are two distinct aspects of fund management that have an important effect on successful investing. Expense ratios refer to the administrative and operational costs incurred when investing in a fund; they are expressed as a percentage of a fund’s assets and represent the annual fee charged by the fund. Management fees, on the other hand, reflect what is paid to financial advisors for managing a portfolio and may vary depending on the complexity of services rendered. Unlike expense ratios which are unavoidable, management fees involve negotiation between the advisor and investor;