1. What is ETF Expense Ratio?

The ETF Expense Ratio (ER) is the annual fee that all funds charge their shareholders. It represents the percentage of assets deducted each fiscal year for fund expenses, including management fees, administrative fees, operating costs, and all other asset-based costs incurred by the fund.

2. How Does the Calculator Work?

The calculator uses the Expense Ratio formula:

Where:

• \( ER \) — Expense Ratio (expressed as decimal)
• \( \text{ETF Operating Costs} \) — Annual operating costs of the ETF in USD
• \( \text{Total Assets} \) — Total assets under management in USD

Explanation: The expense ratio shows what percentage of the fund's assets are used for administrative and other operating expenses.

3. Importance of Expense Ratio

Details: The expense ratio is crucial for investors as it directly impacts returns. Lower expense ratios mean more of the fund's returns are passed to investors. Even small differences can significantly affect long-term investment growth.

4. Using the Calculator

Tips: Enter the ETF's annual operating costs and total assets under management, both in USD. The calculator will compute the expense ratio as both a decimal and percentage.

5. Frequently Asked Questions (FAQ)

Q1: What's considered a good expense ratio?
A: For ETFs, ratios below 0.20% are generally excellent, 0.20-0.50% are reasonable, and above 0.75% are considered high.

Q2: How often is expense ratio charged?
A: The fee is accrued daily and deducted from the fund's assets, so investors don't see a direct charge.

Q3: Does expense ratio include trading costs?
A: No, the expense ratio only includes operational costs. Trading costs (bid-ask spreads, commissions) are additional.

Q4: Why do expense ratios vary?
A: Factors include fund size (larger funds often have lower ratios), strategy (active funds cost more), and asset class.

Q5: Can expense ratios change?
A: Yes, funds may adjust ratios, typically lowering them as assets grow due to economies of scale.