Expense Limit

DEFINITION of 'Expense Limit'

A limit placed on the operating expenses incurred by a mutual fund. The expense limit is expressed as a percentage of the fund's average net assets and represents a cap to the fees a shareholder may be charged.

BREAKING DOWN 'Expense Limit'

Expense limits are often voluntarily placed on a fund by its manager. The addition of an expense limit can make a fund more attractive, as investors are fully aware of the maximum percentage they may be charged. With an expense limit, fees will never be above the stated percentage; however, the fund may charge under the stated limit. Funds that use an expense limit are referred to as capped funds, since the limit caps the fees that shareholders can be charged.

RELATED TERMS
  1. Capped Fund

    A mutual fund that has a limited amount of operating expenses ...
  2. Before Reimbursement Expense Ratio

    The percentage of a fund's average net assets that is used to ...
  3. Expense Ratio

    A measure of what it costs an investment company to operate a ...
  4. Total Annual Fund Operating Expenses

    For a mutual fund or other type of fund management structure, ...
  5. Service Shares

    Mutual fund units that charge service fees to their shareholders. ...
  6. After Reimbursement Expense Ratio

    The actual expense paid by mutual fund investors. The after reimbursement ...
Related Articles
  1. Retirement

    Pay Attention To Your Fund’s Expense Ratio

    Despite trends indicating an overall decrease in fees across many fund categories, investors should still pay attention to expense ratios: even small differences in fees can have a significant ...
  2. ETFs & Mutual Funds

    Pay Attention To Your Fund’s Expense Ratio

    Even small differences in an expense ratio can have a big impact on a portfolio.
  3. ETFs & Mutual Funds

    Trading Mutual Funds For Beginners

    Learn about the basics of trading and investing in mutual funds. Understand how the fees charged by mutual funds can impact the performance of an investment.
  4. ETFs & Mutual Funds

    How Mutual Fund Companies Make Money

    Read about the many different kinds of fees and sales charges mutual fund companies can use to generate revenue from those who invest in their shares.
  5. ETFs & Mutual Funds

    5 Characteristics of Strong Mutual Fund Shares

    Discover some of the basic characteristics shared by good mutual funds that investors can use to help them in selecting funds.
  6. ETFs & Mutual Funds

    ETFs: Exploring Expenses in 2016 (BLK, ITOT)

    Take a good look at the latest trends in ETF costs. While passively managed funds have become less expensive, actively managed funds have not.
  7. ETFs & Mutual Funds

    Selling Mutual Funds: What Happens When You Liquidate?

    Learn about the hidden costs that can be triggered when you redeem mutual fund shares. Even no-load funds have fees and expenses you may not know about.
  8. ETFs & Mutual Funds

    Mutual Funds: Don’t Overpay for Them

    Over the past several years, the average expense ratio that fund companies charge has dropped. For most investors, that means better returns.
  9. ETFs & Mutual Funds

    Mutual Funds: Management Fees Vs. MER

    Having a clear understanding of the fees charged by a mutual fund is a significant component to making an informed investment decision. Often the management fee is used interchangeably with the ...
  10. ETFs & Mutual Funds

    How To Pick A Good Mutual Fund

    Learn how to evaluate mutual funds and find the right one for you.
RELATED FAQS
  1. Why is a mutual fund's expense ratio important to investors?

    Understand the nature of mutual fund expense ratios, and learn why it is critically important for investors to be aware of ... Read Answer >>
  2. Do mutual fund trading costs hurt your bottom line?

    Find out how a mutual fund's expense ratio could be eating into your bottom line, what costs are included and an example ... Read Answer >>
  3. What are typical trust fund management fees?

    Learn about trust fund management fees, such as the annual management fee, annual expense ratio, brokerage commissions and ... Read Answer >>
  4. When is an expense ratio considered high and when is it considered low?

    Discover what is considered an exceptionally high or low expense ratio for a mutual fund or ETF, and learn why this figure ... Read Answer >>
  5. Why do mutual fund companies charge management fees?

    Learn why mutual funds charge their investors management fees, which include the cost of hiring investment advisors and various ... Read Answer >>
  6. What kinds of expenses are included in the expense ratio?

    Understand the variety of costs and charges that are included in the total expense ratio assessed to investors using mutual ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center