This Is What the Normal Expense Ratio Fee Looks Like
What cost ratios do you pay for your investment portfolio? Do you have any idea how much to pay for the convenience of storing hard-earned money in a particular fund?
The expense ratio is the fee you pay to be able to invest your money in this fund. These fees may seem very low – think somewhere around 1%. But while 1% may not sound like a lot, remember that a commission is charged every year that your investment remains (and hopefully grows a lot). Since the commission is automatically deducted from your investment – you don’t get invoiced from the account – you don’t always know what you are paying in exchange for placing your money in the fund.
What is the normal rate of expenditure?
A few rules of thumb to get started:
- Larger companies tend to charge lower fees than smaller ones.
- Passively managed funds will have lower fees than actively managed funds.
- Mutual fund spending ratios are usually higher than ETFs.
- Strive to fill your portfolio with funds with a commission of 0.25% or less .
Here are the average fees from the Investment Firms Institute ‘s 2018 Fee Trends Report:
- Mutual funds: 0.55%
- Hybrid mutual funds: 0.66%
- Bond mutual funds: 0.48%
- Target term for mutual funds: 0.40%
- Money Market Funds: 0.26%
You won’t find your fund’s commissions on your statement, but if you log into your account and select the name of each fund, you can view a summary of your commissions. If you want to check the commission of a fund that you have not yet invested in, an Internet search for the fund name will show detailed information, including commission.