# Expense Ratio

An expense ratio is the annual fee a fund charges its shareholders, expressed as a percentage of assets. It covers management, administration, and operating costs and is automatically deducted from returns.

## Why it matters

Expense ratios silently erode returns over decades. A 1% difference in fees on a $100,000 investment over 30 years can cost you over $100,000 in lost growth. Index funds typically charge 0.03-0.20%, while actively managed funds charge 0.50-1.50% — and most active funds still underperform their benchmark.

Example

A fund with a 0.03% expense ratio charges $3/year per $10,000 invested. A fund with a 1.0% ratio charges $100/year — that $97 annual difference compounds significantly over 30 years.

## How Ray helps

Ray can help you evaluate the cost of your current investments. Try to understand how expense ratios are affecting your long-term returns.

Terminal

`$ ray "what fees am I paying on my investments?"`

## Related terms

[Index Fund

An index fund is a type of mutual fund or ETF designed to track the performance of a specific market index, like the S&P 500.](/content/learn/index-fund/index.html) [Mutual Fund

A mutual fund pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities.](/content/learn/mutual-fund/index.html) [Compound Interest

Compound interest is interest earned on both your original principal and on previously accumulated interest.](/content/learn/compound-interest/index.html) [Portfolio

A portfolio is the complete collection of your financial investments — stocks, bonds, mutual funds, ETFs, real estate, and other assets.](/content/learn/portfolio/index.html) [APY (Annual Percentage Yield)

APY is the real rate of return on a savings or investment account, accounting for the effect of compounding interest.](/content/learn/apy/index.html)

## Try Ray free

Open source, local-first, and takes five minutes to set up.

`$npm install -g ray-finance` [View on GitHub](https://github.com/cdinnison/ray-finance)