Expense Ratios

How Expense Ratios work, via an example.

VT is the Vanguard Total World Stock Index Fund ETF. The latest prospectus at time of this writing is here: https://personal.vanguard.com/pub/Pdf/p3141.pdf

Expenses are .07% in Management fees and .01% in “Other Expenses”. For a total of 0.08% over a year. For every $10k invested it would cost you $8/yr.

VT NAV on February 4, 2021 is 95.30 and there is 24.02B AUM. So there is 24.02B / 95.30 = 250,000,000 shares of VT out and about.

Total expenses on 24.02B X .08% = .02B or 20 million dollars/year to run.

20,000,000 / 250,000,000 = 0.08 ER or it’s 8 cents per share per year.

Let’s try to double check that. $10,000 invested = 105 shares @ NAV of 95.30 * $0.08/share = $8.40/yr expense which is basically what the prospectus says it costs for $10k invested.

Neat!