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Expense Ratio

نسبة المصاريف

The annual percentage deducted from fund assets to cover operating costs — taken from your units automatically, gain or lose.

The expense ratio is a fund's operating cost expressed as an annual percentage of its assets: custody, audit, administration, and similar expenses. You never receive an invoice — it is deducted gradually from the fund's net asset value, so its effect shows up in the unit price itself.

For listed Saudi funds, Tadawul publishes the expense ratio and the management fee as two separate items; the total cost an investor actually bears is their sum. When comparing funds, compare that total, not one component.

The danger of fees is their silent compounding: a one-percentage-point difference per year sounds trivial, but over twenty years it removes a large slice of your final wealth, because whatever was deducted early would have compounded in your favour.

Fees are one of the very few things in investing that are known in advance: future returns are uncertain, but fees are deducted with certainty every year. That is why they carry heavy weight in any objective fund assessment.

Formula

Expense ratio = total annual fund expenses ÷ average net assets × 100

Numeric Example

You invest SAR 100,000 in a fund with a 1.5% total annual cost: about SAR 1,500 is deducted from your units in year one. An index fund at 0.4% would deduct about SAR 400 — and that 1.1% yearly gap, at 7% returns before fees, compounds to over SAR 190,000 of difference across 30 years.

For educational and informational purposes only — not investment advice. Past performance does not guarantee future results.