Expense Ratio

An expense ratio is a fund's annual fee expressed as a percentage of assets, deducted continuously from the fund's returns rather than billed to you. Broad index ETFs now charge 0.03-0.20%; actively managed mutual funds commonly charge 0.50-1.00% or more for the same asset class.

The fee looks trivial and compounds into a fortune. Because it is skimmed from the return every year, a 1% expense ratio does not cost 1% of your money, it costs 1% of your entire balance every year for decades, and the forgone compounding on those fees is the real bill. It is also one of the only return inputs an investor controls completely: the market's return is a hope, the fee is a certainty.