TER (Total Expense Ratio)

The Total Expense Ratio (TER) is the primary cost indicator used to compare ETFs. It represents the percentage of fund assets deducted each year to cover management, administration, custodian and audit fees. An ETF with a TER of 0.20% charges €20 per year on every €10,000 invested.

This deduction is not explicit: it is factored daily into the fund's net asset value (NAV). Investors never receive an invoice — they simply observe that their ETF's net performance is slightly below the replicated index.

How TER is calculated

TER is calculated by dividing total annual fund costs by average net assets over the year. These include: the management fee, custodian fees, administration costs, legal audit fees, and distribution costs where included. TER is annualised and published in the fund's Key Information Document (KID), accessible on the issuer's website and major data platforms (justETF, Morningstar).

TER of major UCITS ETFs in 2026

• SXR8 (iShares Core S&P 500 Acc): 0.07% per year
• SWRD (SPDR MSCI World): 0.12% per year
• IWDA (iShares Core MSCI World): 0.20% per year
• WPEA (Invesco MSCI World, PEA-eligible): 0.19% per year
• CW8 (Amundi MSCI World, PEA-eligible): 0.38% per year

TER vs Tracking Difference

TER is published in advance and represents the issuer's cost commitment. Tracking difference is what is actually observed: the gap between the ETF's annual return and its benchmark's return. An ETF can report a TER of 0.20% but a tracking difference of only -0.05% if securities lending income partially offsets fees. For long-term investors, tracking difference over 3-5 years is a better real cost indicator than the headline TER.

Long-term impact of TER

On €10,000 invested over 30 years at 7% gross annual return, the gap between a 0.07% TER (SXR8) and a 1.50% TER (active fund) is over €20,000 in final capital — 27% of the total. Choosing a low-TER ETF is one of the highest-impact decisions a retail investor can make.