TERs: What's in a name…?

ETFs

Total expense ratios can be a misleading moniker because the ‘total' figure is likely to differ from what the product will actually cost, writes Helen Fowler

The expression ‘total expense ratio’ (TER) sounds like it should include every cost on an ETF. But the word ‘total’ can be deceptive in this context. Far from representing all the costs on a fund, the figure is likely to differ widely from what the product will actually cost someone to own. Despite what the name suggests, the TER of an ETF – or almost any mutual fund – accounts for only some of the costs an investor will bear. Indeed, the ratio is rather less comprehensive than you might expect from the name. It is only the headline cost of a fund – the sum paid to cover the costs of ...