Which term refers to the annual fee assessed for owning a mutual fund or ETF?

Which term refers to the annual fee assessed for owning a mutual fund or ETF?

• A. Expense Ratio
• B. Net Asset Value (NAV)
• C. Exchange Traded Fund (ETF)
• D. Real Estate Investment Trust (REIT)

Answer: (A)

The annual fee you pay to own a mutual fund or ETF is called the expense ratio. It represents the fund’s operating expenses as a percentage of assets and is deducted from the fund’s returns each year. This cost covers the manager’s fee, administrative expenses, and other ongoing costs, and even small differences in expense ratios can compound over time to noticeably affect long-term performance. NAV is simply the price per share of the fund’s holdings, calculated daily, not a fee. An ETF is a type of fund that trades on an exchange, and a REIT is a real estate investment trust; neither is the recurring annual fee described by the expense ratio.

The annual fee you pay to own a mutual fund or ETF is called the expense ratio. It represents the fund’s operating expenses as a percentage of assets and is deducted from the fund’s returns each year. This cost covers the manager’s fee, administrative expenses, and other ongoing costs, and even small differences in expense ratios can compound over time to noticeably affect long-term performance. NAV is simply the price per share of the fund’s holdings, calculated daily, not a fee. An ETF is a type of fund that trades on an exchange, and a REIT is a real estate investment trust; neither is the recurring annual fee described by the expense ratio.