Expense Ratio
Definition
The annual fee charged by a fund to cover operating costs, expressed as a percentage of assets under management.
Explanation
Expense ratios directly reduce investor returns. A 1% expense ratio means $100 in annual fees on a $10,000 investment. Over 30 years, a 1% fee difference compounds dramatically: $10,000 at 10% return with 0.10% fees grows to $164,494; with 1.00% fees, only $132,677 — a $31,817 difference from fees alone. Index funds (0.03-0.10%) have dramatically lower fees than active funds (0.50-1.50%). This fee advantage is a primary reason index funds outperform most active managers over long periods.
How Stoquity Uses This
Stoquity incorporates expense ratio analysis across its portfolio management platform, providing real-time monitoring and AI-powered insights for every portfolio.