The total expense ratio (TER) represents the total costs associated with managing and operating an investment fund, such as a mutual fund or ETF, expressed as a percentage of the fund's average net assets. These costs include management fees, administrative fees and other operational expenses.
TER is a critical figure for investors as it directly affects the net return on their investment. A higher TER means higher annual costs, which can significantly erode investment returns over time, especially in the case of long-term investments.
When evaluating and comparing investment funds, it's important to consider the TER alongside other factors like fund performance, risk profile and investment strategy. While a lower TER is generally preferable, investors should balance cost considerations with the potential benefits of the fund, such as superior management or unique investment strategies. Understanding the total expense ratio helps investors make more informed decisions about which funds best align with their investment goals and cost sensitivity.
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