1. What is Expense Ratio Difference?

The Expense Ratio Difference calculator compares mutual fund costs by calculating the percentage difference between two net asset values (NAVs). This helps investors understand the impact of expense ratios on fund performance and make informed investment decisions.

2. How Does the Calculator Work?

The calculator uses the Expense Ratio Difference formula:

Where:

• \( NAV_1 \) — First net asset value (currency)
• \( NAV_2 \) — Second net asset value (currency)
• Result — Expense ratio difference in percentage (%)

Explanation: This calculation shows the percentage cost difference between two mutual funds, helping investors compare expense ratios and their impact on returns.

3. Importance of Expense Ratio Comparison

Details: Expense ratios directly affect investment returns. Even small differences can significantly impact long-term wealth accumulation due to compounding effects over time.

4. Using the Calculator

Tips: Enter both NAV values in the same currency. NAV1 should be the higher value if comparing expense ratios. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good expense ratio difference?
A: Generally, a lower expense ratio is better. Differences of 0.5% or more can significantly impact long-term returns.

Q2: How do expense ratios affect returns?
A: Expense ratios are deducted from fund assets, reducing overall returns. A 1% expense ratio can reduce returns by 20% over 20 years.

Q3: Should I always choose the fund with lower expenses?
A: While lower expenses are generally better, also consider fund performance, management quality, and investment strategy.

Q4: What's considered a high expense ratio?
A: For index funds, >0.5% is high; for actively managed funds, >1.0% is generally considered high.

Q5: Do expense ratios include all fund costs?
A: Expense ratios include management fees and operational expenses but may not include trading costs or sales loads.