◈ GLOSSARY · INVESTING
Expense Ratio.
A definition, in plain English — with the books that teach it.
Reviewed by ClearValue Editorial Team · Jun 27, 2026
◈ DEFINITION
What it means
Definition
The expense ratio is the annual fee a fund charges, expressed as a percentage of your invested balance. It's deducted automatically from the fund's returns — you never see a bill, but you pay it every year. Over decades, a 1% fee versus a 0.05% fee compounds into a shocking difference.
◈ IN PRACTICE
Example
Invest $100,000 for 30 years at an 8% gross return. At a 0.05% expense ratio, you end with around $999,000. At a 1% expense ratio, you end with around $761,000 — a $238,000 difference, all of it paid to the fund company.
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