What is TER? How costs affect your investment
TER stands for Total Expense Ratio and describes a fund’s ongoing costs as a percentage of its assets. It is a useful comparison point, but does not necessarily cover every cost involved in investing in an ETF.
Wizer Invest · · 4 min read
When comparing ETFs, you often encounter cost percentages such as 0.10%, 0.20% and 0.40%.
The differences can look small. Over longer periods, however, ongoing costs can have a noticeable effect on the investment's total value.
At a glance: TER stands for Total Expense Ratio and describes a fund's ongoing costs as a percentage of its assets. TER is a useful comparison point, but does not necessarily include every cost involved in investing in an ETF.
What does TER mean?
TER stands for Total Expense Ratio.
The term describes a fund's ongoing operating costs relative to its assets.
These costs can include administration, management and other expenses involved in running the fund.
You may also encounter terms such as ongoing charges and ongoing costs.
The calculation methods behind these terms are not always identical. Check which cost figure is actually disclosed in the fund's documentation.
For ETFs covered by the European PRIIPs rules, the Key Information Document (KID) contains standardised information about different cost categories.
How is TER calculated?
Imagine you have invested DKK 100,000 in an ETF with an annual ongoing cost of 0.20%.
If the value stays unchanged throughout the year, the simplified calculation is:
DKK 100,000 × 0.002 = DKK 200
You normally do not receive a separate bill for this DKK 200.
The fund incurs its ongoing costs internally, affecting its value and returns.
The calculation is simplified because the actual assets under management change during the year.
What is the difference between a TER of 0.10% and 0.40%?
Let us compare two hypothetical ETFs with different costs.
| Amount invested | 0.10% annually | 0.40% annually | Annual difference |
|---|---|---|---|
| DKK 10,000 | DKK 10 | DKK 40 | DKK 30 |
| DKK 50,000 | DKK 50 | DKK 200 | DKK 150 |
| DKK 100,000 | DKK 100 | DKK 400 | DKK 300 |
| DKK 500,000 | DKK 500 | DKK 2,000 | DKK 1,500 |
The table assumes the investment has the same value throughout the year.
In practice, costs depend on the fund's value and the calculation method used.
How much do costs matter over 20 years?
Imagine two investments with these assumptions:
Starting amount: DKK 100,000.
Hypothetical annual gross return: 6%.
Investment period: 20 years.
Annual costs: 0.10% and 0.40% respectively.
If we simply subtract the cost percentage from the annual gross return and compound annually, the approximate result is:
| ETF A | ETF B | |
|---|---|---|
| Starting amount | DKK 100,000 | DKK 100,000 |
| Annual costs | 0.10% | 0.40% |
| Assumed net return | 5.90% | 5.60% |
| Value after 20 years | DKK 314,000 | DKK 297,000 |
The difference is approximately DKK 17,000.
This is a mathematical illustration, rather than a forecast. It assumes a constant annual return and excludes tax, trading costs and other differences between the funds.
It shows how a relatively small difference in annual costs can have a larger effect over time.
Does TER cover every cost of an ETF?
No. Distinguish between the fund's ongoing costs and the total expenses of investing.
Other costs may include:
Dealing commissions: Fees your trading platform may charge when buying and selling.
Currency conversion: Costs of trading in another currency.
Bid–ask spread: The difference between the price at which you can buy the ETF and the price at which you can sell it.
Fund transaction costs: Costs of the fund's own trades, which may be reported separately from other ongoing costs.
There may also be other product-specific or platform-specific costs.
TER therefore does not necessarily provide a complete picture of total investment costs.
What is tracking difference?
Tracking difference describes the difference between a fund's return and the return of the index it tracks.
The difference can arise from fund costs, dividend taxes, rebalancing and the method used to track the index.
An ETF with a lower TER can therefore sometimes have a less favourable tracking difference than another ETF.
When comparing tracking difference, make sure returns cover the same period and are calculated on a comparable basis.
How do you compare ETFs on costs?
Imagine you have chosen a maximum annual ongoing cost of 0.25%.
ETF A discloses a cost of 0.15%.
ETF B discloses a cost of 0.35%.
ETF A meets your chosen limit. ETF B exceeds it.
This says nothing about which ETF will deliver the highest future return.
It simply shows how the two products compare with your cost criterion.
In Wizer Invest, costs can be one of several comparison criteria. Risk, geography and diversification can be assessed separately.
Frequently asked questions
What does TER stand for?
TER stands for Total Expense Ratio and describes a fund's ongoing costs as a percentage of its assets.
Do you pay TER every year?
The fund incurs ongoing costs internally, affecting its returns. They are not normally charged to the investor as a separate annual bill.
Is TER the same as a dealing commission?
No. TER concerns the fund's ongoing costs, whereas a dealing commission is a possible fee for trading.
Is an ETF with a low TER always better?
No. ETFs with different costs may hold different investments and have different strategies and risk profiles.
How does TER differ from tracking difference?
TER describes ongoing costs, whereas tracking difference describes the gap between the fund's return and its benchmark's return.
This article provides general information, rather than personal investment advice. The numerical examples are hypothetical.
See what fits your criteria
Choose what matters to you, and see exactly where investments fit — and where they don't.
Choose my criteriaThis article is general information and not investment advice.
Read more
ETF
How do you choose an ETF? 7 criteria to understand
When choosing an ETF, you can compare seven key characteristics: investment universe, risk, costs, diversification, geographic exposure, distribution type and investment strategy. Which characteristics matter most depends on the criteria you want to use.
16 October 2026 · 5 min
ETF
Accumulating or distributing ETF — what is the difference?
An accumulating ETF generally reinvests income within the fund. A distributing ETF pays income to investors according to its distribution policy. The main difference is whether the money stays in the fund or is paid out.
16 October 2026 · 4 min
How many equities does an ETF hold — and are you actually diversified?
ETF diversification depends on more than the number of equities. It also depends on how investments are spread across companies, countries, sectors and shared risk factors. An ETF with many equities can still be concentrated in particular markets.
16 October 2026 · 5 min