FIRE glossary
Expense Ratio
The annual percentage a fund charges to manage your money, deducted from returns before you ever see them.
What it actually costs you
An expense ratio is expressed as a percentage of the fund's assets, charged annually — a fund with a 0.75% expense ratio deducts roughly £7.50 a year for every £1,000 invested. It isn't billed to you directly: it's taken out of the fund's assets continuously, which quietly lowers the return you actually receive compared with the index or strategy the fund is tracking. Two funds tracking the same index with the same gross return can leave you with noticeably different balances after a few decades purely because of this gap, since the fee compounds against you every year, not just once.
Where the number comes from, and what it hides
An expense ratio typically bundles fund management, fund administration, and other running costs into one published percentage — often labelled TER (total expense ratio) or OCF (ongoing charges figure) depending on the fund type and where it's sold. It generally excludes transaction costs the fund incurs buying and selling its own holdings and any platform or adviser fee your broker charges separately, so the number on a factsheet is rarely your full all-in cost. Passively managed index funds and ETFs tend to sit at the cheap end because there's no active stock-picking to pay for; actively managed funds charge more to fund that research and decision-making, with no guarantee the extra cost is recovered in better returns.
How this fits into a FIRE plan
Ember doesn't hold a database of specific funds' expense ratios or read them off a connected brokerage account. Where fees matter in Ember is indirectly, through the real (post-inflation) return assumption you set for each asset class: a fund charging a higher expense ratio should generally carry a lower assumed net return than an equivalent cheaper fund, because the fee is a permanent, compounding drag on what you actually keep. Setting that assumption realistically — net of the fees you're actually paying, not the index's gross historical return — keeps a FIRE number honest rather than optimistic.
Across borders
The same fund can carry different fees in different distribution channels — a US-domiciled ETF, its Irish-domiciled UCITS equivalent, and a local wrapper sold to residents of a given country often charge different expense ratios for near-identical underlying exposure, and withholding-tax treaties on dividends can tilt the comparison further. Moving countries can also change which funds are even available to you (Irish-domiciled UCITS funds are common defaults for European and Gulf-based investors, US mutual funds mostly aren't sold outside the US) — so a fund switch triggered by a residency move is worth re-checking on cost, not just tax treatment, before you commit to it.
Common questions
What counts as a "good" expense ratio?
There's no single threshold Ember asserts. Broad passive index funds and ETFs commonly charge a small fraction of a percent; actively managed funds typically charge more. Compare a fund's expense ratio against similar funds tracking the same or a comparable index rather than judging it against an abstract benchmark.
Does Ember track the expense ratio of my actual holdings?
No — Ember doesn't hold a fund fee database or read expense ratios off your connected accounts. The real-return assumption you set for each asset class in Ember is where the effect of fund fees belongs: a lower net-of-fee return for a more expensive fund. Check a fund's own factsheet or key information document for its current expense ratio before setting that assumption.
Is a 0.5% difference in fees really worth worrying about?
Fee drag compounds the same way returns do, so a persistent difference of even a fraction of a percent, held for decades, works out to a materially different balance by the time it matters. It's one of the few costs in investing that's fully within your control, which is why it's worth checking even when the headline number looks small.
Related terms
See expense ratio in your numbers
The free calculator gives a rough estimate; the full planner models your actual accounts, pensions, residency moves and taxes — with the maths behind every figure shown.