1. What is an ETF Management Fee?

The ETF management fee, also known as the expense ratio, is an annual fee charged by ETF providers to cover operating costs. It's expressed as a percentage of your investment and is deducted automatically from the fund's assets.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• \( Expense\ Ratio \) — Annual fee percentage charged by the ETF
• \( Investment\ Amount \) — Total amount invested in the ETF (AUD)

Explanation: The expense ratio is converted from a percentage to a decimal (by dividing by 100) and then multiplied by your investment amount to determine the actual dollar cost.

3. Importance of Expense Ratio

Details: Even small differences in expense ratios can significantly impact long-term investment returns due to compounding. Lower-cost ETFs generally provide better net returns over time.

4. Using the Calculator

Tips: Enter the ETF's expense ratio as a percentage (e.g., 0.20 for 0.20%) and your total investment amount in Australian dollars. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's a typical ETF expense ratio in Australia?
A: Most Australian ETFs range from 0.05% to 0.50%, with broad market index funds typically at the lower end.

Q2: How often is the fee charged?
A: The fee is calculated daily but deducted from the fund's assets monthly or quarterly.

Q3: Are there other fees besides the management fee?
A: Some ETFs may have buy/sell spreads or brokerage fees, but these are separate from the ongoing management fee.

Q4: How does this compare to managed funds?
A: ETFs generally have much lower fees than actively managed funds, which often charge 1% or more.

Q5: Does the calculator account for compounding?
A: No, this shows only the annual fee for the current investment amount. Your actual costs may vary if your investment grows or shrinks.