Most people who own a fund have never been sent a bill for it — and yet the fund charges them every year. Here is how that works, and where to see what yours cost.
What an expense ratio is
A fund — an ETF or a mutual fund — is a company's worth of work: someone decides what it holds, trades it, keeps the records, has it audited, and answers to a regulator. The fund pays for that out of its own assets, and the expense ratio is the size of that cost, written as a percentage per year of whatever you have in it.
A ratio of 0.03% is three cents a year for every hundred dollars. A ratio of 0.75% is seventy-five cents for the same hundred. It is charged on the value you hold, so as the holding grows, so does the amount.
Why you never get a bill
The fund takes its fee from its own assets, a little every day. Nothing leaves your bank account, no line appears on your statement, and the price you see quoted is already net of it. That is the part that surprises people: the cost is real and continuous, but it is invisible by design — you never had to approve it, so there is nothing to notice.
This is also why a fund fee is not like a trading commission, which is charged per trade and shows up as its own line, or like an advisory fee, which is charged by whoever manages your money.
What is not a fund fee
- A single share of a company — a stock has no expense ratio, because there is no fund around it to run.
- Money in a bank account — checking, savings, a money market account or a CD hold no fund and charge no fund fee.
- A waived fee is free today. Some funds waive part or all of their cost for a period; when the waiver ends, the fee goes back to what the prospectus says.
Where to see yours
Ask in chat — “what do my funds cost me?”, or about one fund by name. You will get, for whatever you asked about:
- each fund's ratio, and what that comes to in dollars a year at today's value;
- a total for the account, the strategy or your whole plan;
- anything we could not price or find a ratio for, named individually.
When we say we do not know
Some holdings have no expense ratio on file with us, and some accounts only report a balance rather than what is inside them. Where that is true we say so and leave the holding out of the total, rather than counting it as zero. A blank is not a bargain — it means look it up in the fund's own documents, which is where the definitive number always lives.
What these figures are, and are not
The figures we show are computed from your own holdings at today's prices: what each fund charges, multiplied by what you hold in it. They are a measure of what you are paying, not advice about whether to keep a fund. Whether a fund earns what it charges is a separate question, and one worth asking about any holding.