What is TER?

Ongoing charges (TER): The yearly percentage a fund charges for management. It seems small but over decades it eats a large part of the return.

TER stands for total expense ratio. It is the share of your money the fund charges each year for management and administration. You do not pay it separately, it comes off the value of the fund.

A difference of one percent looks small. But because it comes back every year and grows with your money, it can add up to a large sum over decades.

Next to the TER there are often other costs. Think of transaction costs, the spread and broker fees.

Example
You invest 10,000 euros for 30 years and the fund earns 6 percent a year before costs. With a 0.2 percent TER you keep 5.8 percent and it grows to about 54,300 euros. With a 1.5 percent TER you keep 4.5 percent and end up with about 37,500 euros.

Watch out
A low TER says nothing about the risk of a fund. It is one of the costs, not the only one.

Read more in the guide What investing really costs: from spread to tax.

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