Impact of Expense Ratio Calculator

Formula

To calculate the Net Return ($NR$):

\[ NR = GI - (GI \times ER) \]

Where:

$NR$ is the Net Return of the investment ($)
$GI$ is the Gross Investment Return ($)
$ER$ is the Expense Ratio (decimal)

What is the Impact of Expense Ratio?

The expense ratio of a mutual fund or ETF (Exchange Traded Fund) is the total percentage of fund assets used for administrative, management, advertising, and all other expenses. An expense ratio impacts the net return an investor gets from the fund. A higher expense ratio means the fund has higher operating costs, which are passed on to investors and can eat into your investment returns over time. Conversely, a lower expense ratio means fewer costs are deducted and investors could potentially receive higher returns.

Example Calculation 1

Let's assume the following values:

Gross Investment Return ($GI$) = $10,000
Expense Ratio ($ER$) = 0.02 (2%)

Using the formula:

\[ NR = 10000 - (10000 \times 0.02) = 9800 \]

The Net Return is $9,800.

Example Calculation 2

Let's assume the following values:

Gross Investment Return ($GI$) = $50,000
Expense Ratio ($ER$) = 0.01 (1%)

Using the formula:

\[ NR = 50000 - (50000 \times 0.01) = 49500 \]

The Net Return is $49,500.