Read the expense ratio
A fund expense ratio describes annual operating expenses as a percentage of fund assets. These expenses are generally paid from the fund’s assets rather than appearing as a separate bill, reducing the value reflected in returns.
Put percentages in dollars
On a hypothetical unchanged $10,000 balance, 0.03% is about $3 per year and 1% is about $100 per year. Actual fund assets change and other costs can apply, so this is only an approximation.
Look beyond one number
A prospectus or fee table can show fund operating expenses and shareholder fees. Depending on the investment and broker, you may also face commissions, account fees or bid-ask spreads; transaction costs may not all appear in the expense ratio.
Compare like with like
Fees matter, but so do the fund’s holdings, strategy, diversification, taxes and risks. Compare products serving a similar purpose, and do not assume a low fee makes an investment suitable or safe.