# Total Expense Ratio (TER): Definition and How To Calculate.

How to Calculate Total Expense Ratio (TER).

#### How is TER deducted?

TER, or total expense ratio, is the percentage of a fund's assets that are used to cover the fund's operating expenses. The remaining percentage is available for investment. The lower the TER, the more efficient the fund is and the better it is for investors.

TER is calculated by taking the total amount of a fund's expenses for the year and dividing it by the fund's average assets for the year. The result is then multiplied by 100 to get a percentage.

For example, if a fund has expenses of \$1 million and average assets of \$100 million, the TER would be 1%.

### What is the difference between expense ratio and management fee?

An expense ratio is the percentage of an investment's assets that are charged each year for operating expenses, including management fees, administrative fees, and other operating expenses. The management fee is a type of expense ratio, but it specifically refers to the fee charged by the investment's manager.

#### What is the meaning of total expense ratio?

The Total Expense Ratio (TER) is an important measure to consider when you are looking at investing in a mutual fund. The TER is a measure of all of the expenses associated with running a mutual fund, expressed as a percentage of the fund's average net assets.

The total expense ratio includes both the management fees charged by the fund company as well as all of the other operational expenses incurred by the fund. These operational expenses can include things like adminstrative costs, accounting fees, and legal fees. The total expense ratio does not include sales charges or loads.

The total expense ratio is important to consider because it can have a significant impact on the performance of a mutual fund. All else being equal, a fund with a lower total expense ratio will outperform a fund with a higher total expense ratio. This is because the expenses associated with running a fund eat into the fund's returns.

When you are looking at the total expense ratio, it is important to compare it to other funds in the same category. This is because the total expense ratio can vary significantly depending on the type of fund. For example, index funds tend to have very low total expense ratios because they are relatively simple to run. On the other hand, actively-managed funds tend to have higher total expense ratios because they require more resources to run.

The total expense ratio is just one factor to consider when you are looking at investing in a mutual fund. However, it is an important factor to consider, and it can have a significant impact on the performance of a fund. Is TER charged annually? Yes, TER is charged annually.

### What is a good expense ratio for a business?

There is no definitive answer to this question, as the ideal expense ratio for a business will vary depending on the specific circumstances and goals of that business. However, as a general rule of thumb, a good expense ratio for a business is one that is lower than the average for businesses in the same industry. This indicates that the business is operating efficiently and effectively, and is able to keep its costs under control.