Advertisement

Total expense ratio

The total expense ratio (TER), also known as the 'expense ratio' is a way to capture the annual costs associated with running a fund such as a unit trust.

The total expense ratio (TER), also known as the 'expense ratio' is a way to capture the annual costs associated with running a fund such as a unit trust. Total costs include management fees, trading fees, legal fees, audit costs and other operational expenses. These are usually expressed as a percentage of a fund's assets.

Advertisement - Article continues below

So, for example, if total expenses are £20m and the fund has assets of £400m, the TER is ((20/400) x 100%) or 5%. Ideally as an investor you want a fund with a low TER as fees eat into returns. It is also worth noting that TERs do not always include all expenses some performance-related fees for example may be left out.

The lowest TERs tend to come with passive funds on a cheap exchange-traded fund (ETF),for example, they may be below 0.5% per year.

See also OCF (ongoing charges figure)

Advertisement
Advertisement

Recommended

Visit/glossary/bonds
Glossary

Bonds

A bond is a type of IOU issued by a government, local authority or company to raise money.
19 May 2020
Visit/spending-it/glossary/601300/quantitative-investing
Glossary

Quantitative investing

Quantitative investing uses sophisticated computer-based mathematical models to identify and carry out trades.
8 May 2020
Visit/glossary/quantitative-easing-qe
Glossary

Quantitative easing (QE)

Quantitative easing (QE) involves electronically expanding a central bank's balance sheet.
8 May 2020
Visit/glossary/600702/emerging-markets
Glossary

Emerging markets

An emerging market is an economy that is becoming wealthier and more advanced, but is not yet classed as "developed".
24 Jan 2020

Most Popular

Visit/investments/stockmarkets/601423/as-full-lockdown-ends-what-are-the-risks-for-investors
Stockmarkets

As full lockdown ends, what are the risks for investors?

In the UK and elsewhere, people are gradually being let off the leash as the lockdown begins to end. John Stepek looks at what risks remain for invest…
29 May 2020
Visit/economy/global-economy/601420/james-ferguson-the-virus-the-lockdown-and-what-comes-next
Global Economy

The MoneyWeek Podcast: James Ferguson on the virus, the lockdown, and what comes next

Merryn talks to MoneyWeek regular James Ferguson of Macrostrategy Partnership about what's happened so far with the virus; whether the lockdown was th…
28 May 2020
Visit/investments/property/601411/can-the-uk-housing-market-escape-a-slump
Property

Can the UK housing market escape a slump?

The Bank of England is predicting a 16% slump in house prices.
29 May 2020