Investing for Beginners .EU, investing A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.
Mark Twain

Total Expense Ratio


‘Total expense ratio shows all expenses of investment fund. It is a good measure that shows you how much of different fees you are really paying when investing in some fund. Total expense ratio is a percentage that is calculated dividing total annual expenses (investment management fee, trading fees, depository fee, currency conversion costs, audit fees and other administration fees) of the fund by the total amount of fund asset value.


Technically there is difference between ‘total expense ratio’ and ‘total annual operating expenses’ whereas latter should not include subscription (purchase) fee. But in practice not all investment managers take a distribution fee so it is better to compare annual expenses. If there is a cap for expenses, you should pay attention to it.


Normal total expense ratio (not including subscription fee and sales load fee which is paid to a broker) or ‘net expense ratio’ of the investment fund should meet these numbers:


Bond funds:

  • Actively managed bond funds 0.5%-1.0%
  • Actively managed high yield bond funds 1.0%-1.5%
  • Index funds for developed markets 0.1%-0.3%
  • Index funds for emerging markets 0.3%-0.5%

Equity funds:

  • Actively managed equity funds for developed markets 0.8%-2.0%
  • Actively managed equity funds for emerging markets 2.0%-3.0%
  • Index funds for developed markets 0.2%-0.8%
  • Index funds for emerging markets 0.5%-1.0%



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