Mutual Fund Expense Ratio | Definition | Calculation

Mutual Fund Expense Ratio

Mutual Fund Expense Ratio | Calculation

A mutual fund's cost of doing business, disclosed in the prospectus as a percent of assets. Also called the operating expense ratio (OER). The ratio includes expenses such as management and advisory fees, overhead costs, distribution and advertising (12b-1 ) fees.

The expense ratio does not include brokerage costs for trading the portfolio, although these are reported as a percentage of assets to the SEC by the funds in a Statement of Additional Information (SAI). The SAI is available to shareholders on request.

Neither the expense ratio nor the SAI includes the transaction costs of spreads, normally incurred in unlisted securities and foreign stocks. These two costs can add significantly to the reported expenses of a fund.

For over 1,000 additional terms and definitions please see our Investment Glossary Guide.

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