TER — Total Expense Ratio
The annual cost of holding the fund, taken automatically, not billed separately.
TER is the all-in annual cost of holding an ETF, expressed as a percentage of assets. A 0.20% TER on a $10,000 position costs about $20/year. It's deducted continuously from the fund's assets (reflected in a slightly lower daily return), not charged to your brokerage account directly — so you'll never see a line-item bill for it, but it compounds against you every year you hold the fund.
A $10,000 position in a fund with a 0.20% TER costs roughly $20/year, deducted continuously from the fund's own assets.
A TER gap that looks trivial year to year compounds against you every single year you hold the fund — over a long enough horizon, the gap between two funds tracking the identical index can add up to a meaningful fraction of your entire return.
$10,000 invested for 30 years at an assumed 7% annual market return: in a fund charging a 0.05% TER, that grows to roughly $75,000 after fees (a 6.95% net return, compounded). In a fund charging 1.00% TER on the exact same underlying index, it grows to only around $57,000 (a 6.00% net return). That's roughly $18,000 lost to fees alone, on an identical investment, purely from a 0.95-percentage-point difference in TER.
- TER differences look tiny year to year (0.03% vs. 0.20% is 17 basis points) but compound meaningfully over decades of holding — this is the single biggest reason index-fund investing skews toward the cheapest fund tracking a given index.
- TER isn't the *only* cost of holding a fund — see Tracking Difference for the real-world gap between a fund's return and its benchmark's, which can diverge from what TER alone would suggest.