What it is
The expense ratio is a fund's yearly cost, as a percentage of your investment. A 0.10% ratio costs $10 a year for every $10,000. You never see a bill: it is taken from the fund's value a little each day.
Why small numbers matter
Fees compound just like returns. On $100,000 over 30 years at 8% before fees:
| Expense ratio | Ending value | Lost to fees |
|---|---|---|
| 0.03% | about $1,002,000 | about $4,000 |
| 0.50% | about $874,000 | about $132,000 |
| 1.00% | about $761,000 | about $245,000 |
Typical ranges
| Fund type | Expense ratio |
|---|---|
| Broad index ETF | 0.03 to 0.10% |
| Sector or factor ETF | 0.10 to 0.40% |
| Active mutual fund | 0.50 to 1.00%+ |
| Leveraged ETF | about 0.90 to 1.00%, plus hidden financing costs |
Other costs
Trading spreads, Portfolio turnover inside the fund, and for leveraged funds the cost of borrowing. See Leveraged ETFs explained.
See also
- Index funds What index funds are, why low-cost index investing beats most professional fund managers over time, and how to use index funds as a portfolio core.
- What is an ETF? What an exchange-traded fund is, how ETFs differ from mutual funds and single stocks, the main types of ETF, and what to check before buying one.
- Compound interest How compound interest and compound returns work, the formula, the rule of 72, and why starting early matters more than investing large amounts later.
Pages that link here: Leveraged ETFs explained
Last updated September 30, 2026. Education only, not investment advice.