Total Expense Ratio - TER


DEFINITION of 'Total Expense Ratio - TER'

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

Total Expense Ratio (TER)

More often referred to as "expense ratio".

BREAKING DOWN 'Total Expense Ratio - TER'

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

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