The ratio of a mutual fund‘s assets (resources) required to cover its annual operating expenses and management fees (to its net assets). For example, if a fund charges $1 per $100 of net assets, the expense ratio is 1%.
Expense ratio is determined based on multiple factors including a fund’s size and type and measures of cost control, etc. However, it is not related to a fund’s sales fee. In practice, expense ratios range from 0.4% to 1%.
It is also known as management expense ratio (MER).
