Definition
The annual fee a fund charges, as a percentage of your balance. Good index funds charge 0.02-0.10%; typical actively managed funds charge closer to 1%, a difference that compounds into a six-figure gap over a career.
Why it matters
Fees are the rare thing in investing you fully control, and they compound exactly like returns, just against you. A one-line fund swap is often worth more than years of clever timing.
Example
On a $500,000 portfolio, a 1.00% fund costs $5,000 a year while a 0.04% index fund costs $200. The $4,800 annual difference, compounding for decades, is a six-figure retirement gap.
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.