Investments & Financial Planning

In reference to a mutual fund , what is the Expense Ratio ?

The Expense ratio is the percentage of the assets that were spent to run a mutual fund as of the last annual statement. This includes expenses such as management and advisory fees, overhead costs and the 12b-1 distribution and advertising fees. The expense ratio does not include brokerage costs for trading the portfolio, although these are reported as a percentage of assets to the SEC by the funds in the Statement of Additional Information. The Statement of Additional Information is available to shareholders on request. Neither the expense ratio or the Statement of Additional Information includes the transaction costs of spreads, normally incurred in unlisted securities and foreign stocks. These two costs can add significantly to the reported expenses of a fund. The expense ratio is often termed as an Operating Expense Ratio.

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