1. What is Weighted Average Expense Ratio?

The Weighted Average Expense Ratio (ER) calculates the overall expense ratio of a portfolio by accounting for the size of each investment. It provides a more accurate measure than a simple average because larger funds have proportionally greater impact on the total expenses.

2. How Does the Calculator Work?

The calculator uses the weighted average formula:

Where:

• Fund AUM — Assets Under Management for each fund (USD)
• ER — Expense Ratio for each fund (decimal)
• Total AUM — Sum of all fund AUMs

Explanation: The formula multiplies each fund's AUM by its ER, sums these products, then divides by the total AUM to get the portfolio-wide weighted average.

3. Importance of Weighted ER Calculation

Details: The weighted ER helps investors understand the true cost of their portfolio. Even small differences in ER can significantly impact long-term returns due to compounding.

4. Using the Calculator

Tips: Enter AUM in USD and ER as a decimal (e.g., 0.0015 for 0.15%). At least one fund is required. ER should be ≥0 and AUM >0.

5. Frequently Asked Questions (FAQ)

Q1: Why use weighted average instead of simple average?
A: Weighted average accounts for fund size differences, giving larger funds appropriate influence on the total cost.

Q2: What's considered a good expense ratio?
A: Generally, lower is better. Index funds often have ERs below 0.20%, while active funds may range 0.50%-1.00%.

Q3: How often should I calculate this?
A: Recalculate whenever you rebalance your portfolio or when funds change their expense ratios.

Q4: Does this include trading costs?
A: No, the ER only includes management fees and operating expenses, not trading costs or taxes.

Q5: Can I use this for ETFs and mutual funds?
A: Yes, the calculation works for any investment vehicle that has an AUM and published expense ratio.