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Expense ratio

The yearly fee a fund charges, as a percentage of your investment.

ETFs & PortfolioBeginner

Definition

The fee is taken out of the fund's returns automatically. Index funds can charge a few hundredths of a percent, while some active funds charge 1% or more. Over decades the difference compounds into a large amount.

Example

Hypothetical exampleOn $10,000, a 0.05% fee costs $5 a year. A 1% fee costs $100 a year.

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