What is a TER (total expense ratio)?
The total expense ratio (TER) is the annual cost of owning a fund, shown as a percentage of the money invested. A TER of 1.00% means roughly R1,000 a year in costs for every R100,000 invested — deducted from the fund, so you rarely "see" it as a separate charge.
What it includes
- The fund manager's fee
- Administration and custody costs
- Audit, compliance, and other running costs
It usually does not include transaction costs (shown separately as the TC), or any advice or platform fees you pay on top.
Why a small percentage matters so much
Fees compound against you in exactly the same way returns compound for you. Over a few years the difference looks tiny; over an investing lifetime it's large.
| On R1,000,000 over 30 years (before fees growing ~9% p.a.) | Roughly… |
|---|---|
| TER 0.5% | Highest end value |
| TER 1.5% | Noticeably less |
| TER 2.5% | Materially less — a meaningful share of the growth lost to fees |
The exact rands depend on the return, but the principle holds: a 1–2 percentage-point difference in TER can cost a large slice of your final value over decades.
How to read it
Compare the TER of similar funds (like-for-like — e.g. two global equity funds), and weigh it against what you're getting. A higher fee isn't automatically "bad" if it buys something you value, but fees are certain while returns are not — so they deserve attention.