A fund’s expense ratio usually comes out of its value every year, whether the fund gains or loses. Iggy and Angela use two made-up funds with the same return before fees to ask what a small yearly percentage does over twenty-five years, and which costs the number leaves out.
We explain why an expense ratio matters even when a fund’s headline return looks attractive. The fee usually comes out of the fund’s value every year, whether the fund gains or loses. Using two made-up funds earning 6% before costs, we show how a 1.5% yearly charge compares with 0.3% over 25 years.
Key takeaways:
An expense ratio is the fund’s yearly running cost, shown as a percentage of its value.
A S$10,000 fund with a 1.5% ratio costs S$150 in its first year.
On S$100,000 earning 6% before costs, 1.5% leaves 4.5% after costs.
After 25 years, the script compares a 0.3% cost fund at about S$400,000 with a 1.5% cost fund at about S$300,000.
The expense ratio does not include sales charges, trading costs, platform fees, or adviser fees.
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This content is produced for educational and informational purposes only. I am not a financial advisor. I am a retail investor who applies forensic analysis to my own portfolio and shares that process publicly. Nothing here constitutes a recommendation to buy, sell, or hold any security, and no specific target prices or personalised financial advice are offered.
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