what is an expense ratio 
the expense ratio is how much you pay a mutual fund or etf per year expressed as a percent of your investments so if you have 5 000 invested in an etf with an expense ratio of 04 you ll pay the fund 2 annually an expense ratio is determined by dividing a fund s operating expenses by its net assets operating expenses reduce the fund s assets thereby reducing the return to investors because the expense ratio is deducted from the fund s gross return and paid to the fund manager investopedia theresa chiechicalculating the expense ratioit s very rare to need to calculate a fund s expense ratio as it is required to state it in its prospectus 1 additionally because it is an important metric for investors expense ratios are almost always found on a fund s website but if you need to calculate it this is the formula er total fund costs total fund assets begin aligned text er frac text total fund costs text total fund assets end aligned er total fund assetstotal fund costs 