Fund fees (TER)

The ongoing cost of holding a fund, quoted as a total expense ratio (TER). Small-looking annual fees compound into large sums over an investing lifetime.

Also called: TER, total expense ratio, fees

A fund's total expense ratio (TER) is the annual percentage it charges to run the fund. A difference that looks tiny in a single year (a fraction of a percent) compounds relentlessly over decades, quietly consuming a meaningful share of an investor's end wealth.

Because cost is one of the few things an investor genuinely controls, low fees are a structural advantage. That is much of why broad, low-cost index funds and ETFs are the default building blocks for a rules-based portfolio.

Related terms

Read it in context

What an ETF isAn ETF is a fund whose shares trade on an exchange like a single company's. You own shares in the fund and the fund owns the assets, so one purchase gives you exposure to everything inside it. The wrapper is straightforward; what decides your risk is the rule that fills it and what it costs to hold.