Expense Ratio
Definition
The annual fee charged by a fund (ETF or mutual fund) expressed as a percentage of assets. A 0.03% expense ratio means you pay $3 per year per $10,000 invested. Low-cost index funds often have expense ratios under 0.10%.
Related Terms
ETF (Exchange-Traded Fund)
A basket of securities that trades on a stock exchange like an individual stock. ETFs typically track an index, sector, or strategy. They offer diversification, low fees, and tax efficiency. Examples: VOO (S&P 500), QQQ (NASDAQ), VTI (Total Market).
Mutual Fund
A pooled investment vehicle managed by a professional fund manager that buys a diversified portfolio of stocks, bonds, or other securities. Unlike ETFs, mutual funds are priced once daily at market close.
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