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Glossary entry · The silent subtractors
Expense ratio
Definition
The yearly cost of owning a fund, expressed as a percentage of assets. An expense ratio of 0.10% means the fund takes $10/year out of every $10,000 invested — automatically deducted from the fund's value, so you never see the bill. The single most important number when comparing funds.
Example
Vanguard's S&P 500 ETF has an expense ratio of 0.03% (≈$3/year per $10,000). Many actively managed funds charge 1%+.
Related
The silent subtractors
Fee
A charge taken from your investment by a fund, broker, or advisor — every year, forever.
Read →Tax
The other silent subtractor. Almost every gain you make is taxed somewhere.
Read →Commission
A fee charged by a broker each time you buy or sell. Mostly $0 with modern brokers.
Read →Tax-advantaged account
An investment account where the government reduces or defers your taxes.
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