What is the impact of expense ratio on investment returns?

What is the impact of expense ratio on investment returns?

The expense ratio represents the costs associated with managing an investment fund. A higher expense ratio can reduce your overall returns.

Can you give me an example of how it affects returns?

Sure! If a fund has a 1% expense ratio, and it generates a 6% return, your net return would be 5%. Lower expense ratios can significantly enhance your returns over time.

How do I find the expense ratio of a fund?

You can typically find the expense ratio in the fund's prospectus or on financial websites that track mutual funds and ETFs.

Is there a recommended expense ratio I should look for?

Generally, an expense ratio below 0.5% is considered low, while anything above 1% is on the higher side. It’s best to compare ratios within the same category of funds.