The expense ratio of an exchange traded fund (ETF) is one important thing that investors consider when selecting a fund. And of course, the lower the expense ratio, the better. The expense ratio is defined as the percentage of a portfolio’s net assets used to pay its expenses.

ETF Guide reports that within these expenses are management fees, administrative fees, and 12b-1 marketing fees, which are all costs that can eat into returns.

Vanguard Group recently lowered the expense ratios of three of its 37 ETFs. When considering expense ratios, it is also important to factor in a fund’s category average, and its corresponding index strategy average. Comparing a category average is a good way to compare expenses for ETFs in the same investment universe.

  • Vanguard Emerging Markets (VWO) expense ratio 0.25%; category average 0.55%; Index strategy box average 0.33%.
  • Vanguard European ETF (VGK) 0.12%; 0.50%; 0.33%.
  • Vanguard Pacific ETF (VPL) 0.12%; 0.50%; 0.33%.

If you own any ETFs, check the prospectus, because reduced costs may be temporary. Find out when those fee waivers expire.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.