What is expense ratio

What is expense ratio and how it is calculated.
Also,as to how does this impact the value in a portfolio?

1 Answer(s)


All funds have operating expenses to run the fund. These expenses include salaries, research tools and other overheads.

The expense ratio of a fund is calculated by dividing the annual operating expenses by the assets under management (AUM).

Operating expenses are taken from the funds assets and hence negatively affects the investors returns.