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Total Expense Ratio (TER)

The Total Expense Ratio (TER) is a measure of the total costs associated with managing and operating an investment fund, such as a mutual fund or exchange-traded fund (ETF). It includes management fees, administrative fees, and other operational expenses. TER is expressed as a percentage of the fund’s total assets and gives investors an idea of how much they will pay in fees relative to their investment. Lower TERs are generally more favorable for investors as they reduce the drag on returns.

Example

An ETF with a TER of 0.5% means that investors will pay 0.5% of their total investment annually in management and operational fees.

Key points

• A measure of the total costs associated with managing an investment fund.

• Includes management, administrative, and operational fees.

• Expressed as a percentage of the fund’s total assets, with lower TERs being more cost-effective.

Quick Answers to Curious Questions

It shows how much investors will pay in fees each year, helping them evaluate the cost of holding a fund and its impact on overall returns.

Management fees are just one component of TER, which also includes administrative and operational costs.

Higher TERs reduce the net returns that investors receive, making it harder for funds to outperform over the long term.

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