Annual management fee charged by a fund, expressed as a % of assets. A 1% expense ratio on a 7% gross return takes ~25% of your final wealth over 30 years.
The expense ratio (also called the total expense ratio, TER) is the annual percentage of fund assets used to pay for the fund's operating costs — management fees, administration, custody, audit.
It's the most important number on a fund factsheet. A fund with a 1% expense ratio takes 1% of your assets each year, deducted daily and reflected in the NAV. You never see a separate bill, but the drag is real.
1% vs 0.10% on a 7% gross return: looks like a 0.9% difference per year. Over 30 years, the lower-cost fund returns ~6.9% net, the higher-cost ~6%. Final wealth ratio: 1.32×. The cheap fund has 32% more money at retirement.
Over 40 years, the ratio widens to 1.48×.
This is why low-cost ETF investing has become dominant globally. The 'free lunch' is not paying for active management that mostly underperforms.
Broad-market ETFs: VWRA / IWDA / CSPX run 0.07% – 0.22%. STI ETF runs 0.30%.
Singapore-listed active funds: typically 1.5% – 2%.
Unit trusts on bank platforms: 1.2% – 2.5%, plus sales charges of 1% – 5%.
Endowus / Syfe / StashAway robo all-in (advisor fee + ETF TER): 0.4% – 0.8%.
ILP underlying fund TER: 0.8% – 2%, plus the ILP's own admin and mortality charges on top.
Transaction costs: brokerage commissions, bid-ask spread, market impact. Not in the headline ER.
Sales charges and exit loads: front-load or back-load fees on some unit trusts; you pay these on top.
Taxes: dividend withholding tax on foreign-domiciled ETFs (15% for Irish-domiciled, 30% for US-domiciled). For long-term holders this matters more than 0.05% ER differences.
Currency conversion costs: if your portfolio is in USD but you fund it in SGD, your bank's FX spread (1% – 2% retail rates) is a hidden recurring drag.
The annual fee a fund charges, expressed as a percentage of assets. A 1% expense ratio on S$100,000 invested costs S$1,000 per year — deducted invisibly from fund returns. Lower is always better for net returns.
For broad-market ETFs: 0.03% – 0.20% is excellent. For unit trusts: under 0.50% is good (rare in active funds). Active equity unit trusts in Singapore often charge 1.5% – 2% — punishing over multi-decade horizons.
On a S$200,000 portfolio compounding at 7% gross for 30 years: ~S$1.52M ending balance net of 1% fee, vs ~S$1.81M at 0.1% fee. That's S$290,000 lost to fees over 30 years on a single S$200k investment. Multiplied across regular contributions, the impact is even larger.
Not all. It excludes transaction costs (bid-ask spread, brokerage commissions on the fund's trades), sales charges (front or back load), and FX conversion costs for cross-currency investing. Always check the total cost of ownership, not just the headline expense ratio.