Total Expense Ratio - TER

Total Expense Ratio - TER

A measure of total costs associated with managing and operating an investment fund such as a mutual fund. These costs include mainly the management and additional expenses such as trading fees, legal fees, auditor fees and other operational expenses. The total cost of the fund are divided by the fund's total assets to arrive at a percent, which represents the TER.

Notes:

The size of the ratio is important to investors as the costs come out of the fund and hurt the returns that investors achieve. For example, if a fund generates a return of 7% for the year but has a TER of 4%, investors' 7% gain is greatly diminished (to roughly 3%).

See also: 12B-1 Fees, Active Management, Expense Ratio, Mutual Fund, Passive Management, Portfolio Manager