Expense ratios
Understand why expense ratio = total annual fund costs ÷ assets.
In this lesson
Expense ratios is part of Funds and ETFs. This preview shows how investment-universe connects to everyday family decisions such as earning, saving, spending choices, goals, approvals, or parent-guided money conversations inside Progress Penguin.
Today’s money mission
Imagine this situation: Fund A: 15% return, 0.2% expense ratio. Fund B: 15% return, 2.0% expense ratio.
What you need to know
Expense ratio = total annual fund costs ÷ assets. It is deducted daily from the fund's NAV (net asset value) — you never see a direct charge but your returns are reduced by this amount annually. A 2% expense ratio means the fund must outperform a 0.2% fund by 1.8% just to deliver the same net return to you.
Real-life example
Real-life money moment: Fund A: 15% return, 0.2% expense ratio. Fund B: 15% return, 2.0% expense ratio. On 1000000 in local currency over 20 years, approximate difference in ending wealth? The key lesson is: The expense ratio compounds against you.
Progress Penguin connection
Open the investment simulator and run the same ₦500,000 investment over 30 years with two expense ratios: 0.5% and 2.5%. Look only at the final balance difference. That local currency gap — produced by a 2% annual fee difference — is the real cost of a high-expense-ratio fund.
Activity preview
Choose the best money move
Use what you just learned. Choose the option you can explain.
Try one real money action
Open Tasks and submit proof for one task, or open Requests and make a deposit request. Parent approval can happen later.
Quiz preview
An 'expense ratio' is:
Fund A: 15% return, 0.2% expense ratio. Fund B: 15% return, 2.0% expense ratio. On 1000000 in local currency over 20 years, approximate difference in ending wealth?