Expense ratio
The annual fee a fund charges, quoted as a percentage of your balance and deducted automatically from returns — you never see a bill.
An expense ratio is a fund's annual fee, quoted as a percentage of the money you have in it. A 1% ratio means whatever the fund earns in a year, you receive one percentage point less. A 0.05% ratio means five hundredths of a point. Ratios on broadly similar funds really do span that range.
You never receive a bill. The fee is subtracted inside the fund, day by day, which is exactly why it is easy to ignore and worth translating into dollars once. Because every dollar taken in fees is also a dollar that stops compounding for you, the gap between a low-fee and a high-fee fund widens with time.
Every fund publishes its expense ratio in its summary prospectus and on the brokerage's fund page, usually one line labeled "expense ratio" or "net expenses." It is one of the few numbers in investing known in advance and charged with certainty.
Plumb is financial education, not financial, investment, tax, or legal advice.