Is high expense ratio good or bad?

In general, the lower the expense ratio, the better it will be for investors. Actively managed funds usually have higher spending ratios, and the amount of expenses will also vary depending on the fund's strategy or asset class approach. Compare spending ratios for similar funds to determine what is good. There are several factors that determine whether an expense ratio is considered high or low.

A good expense ratio, from the investor's point of view, ranges from 0.5% to 0.75% for an actively managed portfolio. A spending ratio greater than 1.5% is considered high. Some funds have several classes of shares, each with a different spending ratio. For example, a fund may have a class A with an expense ratio of 1.00% and a class C with an expense ratio of 1.50%.

The difference in spending ratios can be significant, so it's important to fully understand how this works for the fund being considered. The best cost ratio is 0%. Surprisingly, some passive fund managers are starting to offer index funds with 0% spending ratios. A good spending ratio for an investment fund is less than 1%.