What is an expense ratio?
Every mutual fund and ETF charges an annual fee called the expense ratio — a percentage of your assets deducted automatically each year. You never see an invoice. The money is quietly taken from your fund's returns before you see them.
A 0.03% expense ratio (like Vanguard's VTI) costs $3 per year on a $10,000 investment. A 1.0% expense ratio costs $100 on the same investment. That difference compounds dramatically over time.
The real cost: On a $50,000 portfolio growing at 7% over 30 years, a 1% expense ratio vs 0.03% costs you approximately $112,000 in lost wealth. The fee isn't just money you paid — it's the compounding those dollars would have generated.
How to find your expense ratio
Log into your 401k or brokerage account. Find the fund name. Google "[fund name] expense ratio" — it's public information. Alternatively, look it up on Morningstar or the fund's prospectus. If you're paying over 0.50%, you should seriously consider switching to a lower-cost alternative.
Check if your 401k funds are costing you too much. Our paths page explains how to decode your plan.
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