How to Calculate the Total Expense Ratio for a Portfolio
Certain investment portfolios, such as mutual funds, are measured in terms of an expense ratio, which is the cost of owning a fund. As funds are managed and run by a group of finance professionals, a certain amount of the fund's assets is put toward the costs of the fund's administrative expenses. Usually, the expense ratio is published on financial publications. You can, however, calculate the total expense ratio as long as you have the appropriate information.
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Instructions
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Add up the total costs for the fund. Found on most financial publications, this includes the investment advisory fee, also known as the management fee. The management fee goes toward the salaries of the fund's management. The other component of costs include the administrative costs, which go toward maintaining customer service, record keeping and 12b-1 distribution fees.
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Add up the total assets of the fund. Information regarding total assets are relatively easy to come by, especially if you're researching different funds for your investment. Listed on financial publications, the total assets of the fund may lie within the fund's specialty, which may include construction, communication, banking, health care or natural resources.
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Divide total fund costs by total fund assets in order to obtain the expense ratio for the fund. Obviously, the smaller the expense ratio, the more desirable the fund. According to Yahoo! Finance, most mutual funds have an expense ratio of about 1.5 percent. This ratio usually is fixed, so the costs to own a fund don't change when its performance fluctuates.
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