Total Expense Ratio (TER)

The total expense ratio shows how much a mutual fund or an ETF charges you as a whole for its expenses. The TER is the cost you pay to the mutual fund house for owning one of their products. The TER is usually a percentage of assets under management and is used to pay for expenses such as salaries, marketing, sales, portfolio management, administrative costs, etc.

If a mutual fund or ETF has a TER of 0.3%, the fund house will reduce that amount from your returns yearly, as long as you stay invested. Passively managed funds such as index funds and ETFs generally have lower TERs than actively managed funds.