A good expense ratio depends on various factors, including whether the fund is actively or passively managed. Typically, for actively managed funds, a good expense ratio falls between 0.5% and 0.75%. Ratios above 1.5% are generally considered high.
High and Low Ratios
A number of factors determine whether an expense ratio is considered high or low. A good expense ratio, from the investor's viewpoint, is around 0.5% to 0.75% for an actively managed portfolio. An expense ratio greater than 1.5% is considered high.
Typically, expense ratios between 0.5% and 0.75% are considered 'good' for actively managed funds. Ratios above 1.5% are considered high.
Depends on what the fund is. If you're looking for a big index fund, like a total market or S&P 500, I think anything over . 10% is unreasonable. If you're looking at a total bond fund, I think anything over . 25% is unreasonable. If it's some unique / sector ETF, . 89% isn't necessarily terrible.
What is a good expense ratio? Typically, ETFs have lower expense ratios than mutual funds. Generally, low-cost equity ETFs will have a net expense ratio of no more than 0.25%. Low-cost equity mutual funds will have expense ratios of 0.5% or lower.
It can depend on the type of fund. Equity mutual fund expense ratios average 0.42%, according to 2023 data from the Investment Company Institute. Hybrid funds average 0.58% and bond funds average 0.37%. 4 A mutual fund expense ratio that is at or below the average is ideal.
From the investor's perspective, an effectively managed portfolio's expense ratio should be between 0.5% and 0.75%. A high expense ratio is one that is larger than 1.5 percent. This means that for every $100 you invest in the fund, you can expect to pay no more than $1 in fees and expenses.
Fund B has an expense ratio of 0.75%. Again, this tells us that it is likely an actively managed fund and that we pay $75 for every $10,000 we invest. While that doesn't sound like a lot, it can add up over the course of 30 years, or once you have hundreds of thousands of dollars invested.
Low expense ratio: VOO has an expense ratio of 0.03%, one of the lowest among S&P 500 ETFs. This is cost-effective as the value of the investment grows over time.
The operating expense ratio is given as a percentage. A fund with a 1% ratio per annum means that 1% of the overall assets will be used to cover expenses in the space of a year. For example, with an annual expense ratio of 0.9%, the operating expenses would be $9 per $1000 invested over a year.
Typically, any expense ratio higher than 1 percent is high and should be avoided. Over an investing career, a low expense ratio could easily save you tens of thousands of dollars, if not more. And that's real money for you and your retirement.
SPY is more expensive with a Total Expense Ratio (TER) of 0.0945%, versus 0.03% for VOO. SPY is up 28.31% year-to-date (YTD) with +$7.13B in YTD flows. VOO performs better with 28.36% YTD performance, and +$103.99B in YTD flows.
50% of your net income should go towards living expenses and essentials (Needs), 20% of your net income should go towards debt reduction and savings (Debt Reduction and Savings), and 30% of your net income should go towards discretionary spending (Wants).
Expense ratio: 0 percent. That means every $10,000 invested would cost $0 annually.
Equity Mutual Funds: Typically, an exit load of 1% is charged if units are redeemed within 12 months of investment. Long-term holdings usually incur no charges.
Generally considered cost-efficient if the expense ratio is below 0.2%, with some options as low as 0.03%.
According to Morningstar, the average ETF price is 0.45%. So, at first sight, any ETF expense ratio above that value has to justify its costs with an outstanding performance.
The SPY comes with an 0.09% expense ratio, which is the ETF equivalent of fund management fees. An investor who invests $100,000 into the SPY ETF must pay $90 as management fees.
Mutual fund expense ratios can vary widely, typically ranging from 0.1% to over 2%. Low-cost index funds often have expense ratios below 0.5%, as they aim to track a specific market index and have a passive management style with lower turnover.
For a typical 401(k) plan, the expense ratio should be no higher than 2% and more likely in the 1.0% to 1.5% range. The lower the expense ratio the better, with higher fees eating into profits.
If the fund had a 3-year annualized pre-tax return of 10%, an investor would have taken home roughly 8% on an after-tax basis. Tax cost ratios typically fall within the range of 0-5%. A 0% tax cost ratio means the fund had no taxable distributions, while a 5% ratio suggests the fund was less tax efficient.
Here, 50 per cent of your income should go towards living expenses (needs), like household expenses, groceries; 20 per cent (savings) towards savings for your short, medium, long-term goals; and 30 per cent towards spending (wants), including outings, food and travel.
An optimal operating expense ratio is typically between 60% to 80%, with lower percentages indicating greater efficiency. However, this range can vary based on regional differences, farm size and production type, as each operation has distinct cost structures.
However, expense ratios are not included simply because they don't meet the criteria of an expense paid that produces taxable income. When you receive your income from the fund, the expense ratio is already deducted -- it's not a fee that you pay directly.