Annual Expense Ratio Calculator

Formula

The formula to calculate the annual expense ratio is:

\[ ER = \left( \frac{E}{A} \right) \times 100 \]

Where:

$ ER $ is the expense ratio (%)
$ E $ is the annual expenses ($)
$ A $ is the total assets ($)

What is an Expense Ratio?

An expense ratio is a measure of the cost of managing and operating an investment fund, expressed as a percentage of the fund’s total assets. It includes management fees, administrative fees, and other operational costs. The expense ratio is an important metric for investors, as it directly impacts the net returns of the investment. A lower expense ratio indicates a more cost-efficient fund, while a higher expense ratio can erode investment returns over time.

Example Calculation

Let's assume the following values:

Annual Expenses (E) = $5,000
Total Assets (A) = $200,000

Using the formula to calculate the expense ratio:

\[ ER = \left( \frac{5,000}{200,000} \right) \times 100 = 2.5 \% \]

The expense ratio is 2.5%.