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.
What makes a good ER for a fund? For domestic stock funds in the US, an ER below 0.1% is great, below 0.25% is good, below 0.5% is fair, and below 1% is sometimes the best you can manage in an expensive plan.
For instance, a passively managed fund with an expense ratio of 0.9% wouldn't be ideal as it is almost five times higher than the average. However, an actively managed fund with the same expense ratio of 0.9% would be considered good.
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.
Typically, any expense ratio higher than 1 percent is high and should be avoided.
Ratios above 1.5% are considered high. In this article, we explore the meaning of the expense ratio, its formula, how it works, and its impact on returns with relevant examples.
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).
An expense ratio of 0.2%, for example, means that for every $1,000 you invest in a fund, you'll be paying $2 annually in operating expenses. These funds are taken out of your expenses over time, so you won't be able to avoid paying them.
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.
Is 0.8 expense ratio high? For an actively managed fund, a 0.8% TER is considered relatively low. However, always compare TERs within similar fund categories. An index fund with a 0.8% TER might be considered slightly high compared to others in the same category.
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.
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.
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.
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.
First, calculate your monthly take-home pay, then multiply it by 0.70 to get the amount you can spend on living expenses and discretionary purchases, such as entertainment and travel. Next, multiply your monthly income by 0.20 to get your savings allotment and 0.10 to get your debt repayment.
A good monthly income in California is $5,002, based on what the Bureau of Economic Analysis estimates that Californians pay for their cost of living. A good monthly income for you will depend on what your expenses are and how much you typically spend per month.
If the debt you take on helps you generate income or build your net worth, then that can be considered “good.” Loans like mortgages are usually considered good debt because they provide value to the borrower by helping them build wealth.
Berkshire Hathaway owns two exchange-traded funds (ETF), The SPDR S&P 500 ETF Trust (NYSEMKT: SPY) and the Vanguard S&P 500 ETF (NYSEMKT: VOO). Both of these ETFs track the S&P 500.
For example, you might buy SPY if you want to trade actively, or even venture into day trading, because of its high volume. You might consider buying VOO to hold over the long term because of its lower expenses.
Average Return
In the past year, QQQ returned a total of 24.57%, which is slightly higher than VOO's 23.44% return. Over the past 10 years, QQQ has had annualized average returns of 18.38% , compared to 13.11% for VOO. These numbers are adjusted for stock splits and include dividends.
Buy and sell: *Vanguard average ETF and mutual fund expense ratio: 0.08%. Industry average ETF and mutual fund expense ratio: 0.44%. All averages are asset-weighted.
SPY has an expense ratio of 0.09%, which, while low, is still higher than that of VOO,'s 0.03%, one of the lowest expense ratios for S&P 500 ETFs. This makes VOO more cost-effective for long-term investors, as expense ratio differences compound over time and impact returns.
Invesco QQQ's total expense ratio is 0.20%. Investment returns and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than performance quoted.