alleryStart learning →What does the expense ratio of a fund express?
ATotal sales loads over the amount invested
BAnnual operating expenses over average net assets
CPortfolio turnover over the number of holdings
DDistributions paid over the shares outstanding
Answer & Solution
Correct answer: B. Annual operating expenses over average net assets
1. The expense ratio is the total annual fund operating expenses line of the fee table.
2. It gathers management fees, 12b-1 fees and other expenses into one figure.
3. That figure is expressed as a percentage of the fund's average net assets.
4. Because the base is the same for every fund, the ratio is what lets an investor compare costs across funds.
_Source: US SEC Office of Investor Education and Advocacy, "Mutual Funds and ETFs: A Guide for Investors", section Fee Table: Annual Fund Operating Expenses_
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