The fund’s yearly cost as a percentage of the money invested, deducted inside the fund. 0.05% means $5 a year per $10,000.
Example
Suppose you put $50,000 into a fund with a 0.05% expense ratio and the same amount into another charging 0.75%. The first costs about $25 a year and the second about $375, a gap of $350 a year at that balance. You never get a bill for either: the cost comes out of the fund’s assets and shows up as a slightly lower return.
Hypothetical numbers, for illustration only.
A growth chart over 0 to 30 years for a hypothetical $10,000 growing 7% a year before costs: a green line for a 0.05% yearly cost ending near ≈ $75,000 and a red line for a 1.00% yearly cost ending near ≈ $57,000, with the hatched gap between them bracketed as ≈ $18,000 and labeled fees plus the growth they would have earned.