how is expense ratio calculated 
the expense ratio is calculated by dividing a fund s net expenses by its net assets the bottom lineexpense ratios are taken from mutual fund and etf returns to help pay for operations and fund management the expense ratio charged to investors will vary depending on the fund s investment strategy and level of trading activity in general expense ratios have declined steadily as competition for investor dollars has heightened actively managed funds and those in less liquid asset classes tend to have higher expense ratios while passively managed index funds feature the lowest expense ratios 