Definition: With mutual funds the expense ratio is the cost of owning a fund and reflects the percentage of the fund's assets that are applied strictly to the expense of running the fund. An expense ratio of 1.5 percent, for example, would mean that 1.5 percent of the fund's assets are paid to the fund company to cover expenses. Those expenses include administrative costs, the investment advisory fee, 12b-1 distribution fees and other operating expenses.
