Total Expense Ratio (TER)
What a fund charges you every year for managing your money, why a fraction of a percent compounds into a large sum over decades, and what the TER leaves out.
Key idea
The TER is a fund's yearly running cost, shown as a percentage of your investment. It's taken from the fund's assets, so you never see a bill, only a slightly lower return. Because it's charged every year on a growing balance, the gap compounds: on CHF 50,000 at 5% a year, a TER of 1.5% instead of 0.2% leaves you CHF 63,744 less after 30 years.
What it is
Every fund has running costs: the management fee, plus administration, custody and audit. The total expense ratio, or TER, adds them up and shows them as a yearly percentage of your investment. A TER of 0.2% means CHF 2 a year for every CHF 1,000 you have in the fund.
You never pay it as a bill. The fund takes it from its assets bit by bit through the year, so it only shows up as a slightly lower return. That's exactly why it's easy to overlook.
What 1.3 percentage points cost
Two funds hold the same investments and both earn 5% a year before costs. One has a TER of 0.2%, the other 1.5%. Both are realistic in Switzerland: in September 2026, the index funds and ETFs on Swiss shares compared on the active vs passive investing page cost 0.09% to 0.41% a year, the actively managed funds 1.16% to 1.50%.
Taking the TER off each year's return leaves 4.8% and 3.5%, and the difference compounds. Here's CHF 50,000 in each:
After 10 years
- TER 0.2%: CHF 79,906.63
- TER 1.5%: CHF 70,529.94
After 20 years
- TER 0.2%: CHF 127,701.40
- TER 1.5%: CHF 99,489.44
After 30 years
- TER 0.2%: CHF 204,083.78
- TER 1.5%: CHF 140,339.69
After 10 years the cheap fund has grown to CHF 79,906.63 and the expensive one to CHF 70,529.94. After 20 years it's CHF 127,701.40 against CHF 99,489.44, and after 30 years CHF 204,083.78 against CHF 140,339.69.
In the first year the gap is CHF 650: CHF 100 in fees against CHF 750. It grows to 9,376.69 after 10 years, 28,211.96 after 20 and 63,744.09 after 30. Without any costs, the money would have grown to 216,097.12, so the cheap fund cost you 12,013.34 along the way and the expensive one 75,757.43, more than the CHF 50,000 you started with.
Why it deserves attention
A small number with a large effect, for three reasons:
Charged automatically
It's taken from the fund's assets as the year goes on, with no invoice. You only see it in the return.
Compounds against you
Every franc paid in fees is a franc that stops earning returns, year after year.
Easy to compare
Funds publish their TER. Of two funds tracking the same index, the cheaper one often ends ahead.
The honest caveat
The TER doesn't include every cost. Your broker's trading fees, Swiss stamp duty and the spread between the buying and the selling price all come on top. So do the fund's own trading costs, which it pays when it buys and sells shares inside the fund.
A better measure of the costs inside the fund is the tracking difference: how far its return trails the index it follows. And the cheapest fund isn't automatically the best one. A fund that holds the wrong things for you is expensive at any TER.
Swiss note
The same maths applies to Pillar 3a. Investing 3a money in securities means paying yearly fees too, and since 3a money often stays invested for decades, the fee compounds for decades. When you compare 3a providers, compare their total yearly cost, not just their past returns.
Key takeaways
- —The TER is a fund's yearly cost as a percentage of your money, deducted inside the fund so you never see a bill.
- —On CHF 50,000 at 5% a year for 30 years, a TER of 1.5% instead of 0.2% leaves you CHF 63,744.09 less.
- —Funds publish their TER, which makes it the easiest cost to compare.
- —It doesn't include everything: broker fees, stamp duty, spreads and the fund's own trading costs come on top.
Related concepts
Exchange-Traded Fund (ETF)
One trade, many companies: how ETFs work and what they cost.
Index Fund
Copy the market instead of trying to beat it, at a fraction of the cost.
Accumulating vs Distributing ETFs
Paid out or reinvested: what a fund does with its income, and how it's taxed.
Active vs Passive Investing
Why most active Swiss equity funds trailed the index, and what that costs.