Glossary
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.
$ 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.
Mutual Fund
A mutual fund pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities.
Compound Interest
Compound interest is interest earned on both your original principal and on previously accumulated interest.
Portfolio
A portfolio is the complete collection of your financial investments — stocks, bonds, mutual funds, ETFs, real estate, and other assets.
APY (Annual Percentage Yield)
APY is the real rate of return on a savings or investment account, accounting for the effect of compounding interest.