An expense ratio (ER), also referred to as the management expense ratio (MER), quantifies the proportion of a fund’s assets that are allocated toward covering administrative and other operational expenses. These operating expenses include costs associated with fund management, administration, marketing, and other overheads. By calculating the expense ratio, investors can gauge the efficiency and cost-effectiveness of an investment fund. A lower expense ratio typically implies that a larger share of the fund’s returns is passed on to investors, making it an important metric for evaluating the cost structure of investment products.
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