Enter the total fund costs and the total fund assets into the calculator to determine the expense ratio.

Expense Ratio Formula

The following formula is used to calculate an expense ratio. 

E = TC / TA
  • Where E is the expense ratio
  • TC is the total fund costs ($)
  • TA is the total fund assets ($)

To calculate the expense ratio, divide the fund costs by the fund assets.

Expense Ratio Definition

The expense ratio of a fund is defined as the ratio of total fund costs to the total value of the fund’s assets.

Expense Ratio Example

How to calculate expense ratio?

  1. First, determine the total costs.

    Calculate the total fund costs associated with the fund. For this example, we will say the total fun costs is $10,000.00

  2. Next, determine the total assets.

    Using the same method, determine the total assets. For this example, we will assume the assets are $100,000.00

  3. Finally, calculate the expense ratio.

    Using the formula we find the expense ratio to be 10,000/100,000 = .10.

FAQ

How does the expense ratio affect an investor’s return?

The expense ratio directly impacts an investor’s return because it is deducted from the fund’s total assets, reducing the overall return to the investor. A higher expense ratio means more costs are being taken out, which can significantly lower the investment’s net return over time.

Can the expense ratio change over time?

Yes, the expense ratio can change over time. Factors such as changes in the total fund assets, adjustments in the fund’s management fees, or operational costs can lead to variations in the expense ratio. Fund managers may adjust fees to remain competitive or to reflect the cost of managing the fund.

Are there different types of expense ratios for different funds?

Yes, different types of funds typically have different expense ratios. For example, actively managed funds often have higher expense ratios due to the cost of research and active trading. In contrast, passively managed funds, like index funds, usually have lower expense ratios since they replicate the performance of a specific index and require less active management.

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