The Expense Ratio is the annual fee charged by a fund to cover its operating and management expenses. It is expressed as a percentage of the fund’s assets.

For example, an ETF with an expense ratio of 0.20% charges €2 annually for every €1,000 invested. The fee is deducted automatically and is reflected in the fund’s performance.

While the difference may seem small, lower expense ratios can have a significant impact on long-term investment returns due to the power of compounding.