Glossary

The expense ratio of an ETF (exchange-traded fund) is a measure of the costs associated with managing and operating the fund.

It's expressed as a percentage of the fund's total assets and typically includes management fees, administrative costs, and other operational expenses. A lower expense ratio indicates that the fund is more cost-efficient, allowing investors to keep more of their returns. 💸

For example, if an ETF has an expense ratio of 0.25%, it means that an investor would pay $2.50 annually for every $1,000 invested in the fund.

Fun fact: Expense ratios for ETFs tend to be lower than those for actively managed mutual funds, mainly because ETFs are often passively managed and track a specific index. This cost advantage is one reason why many investors are drawn to ETFs over traditional mutual funds. 🌎