Expense ratio

The yearly cost of a fund, as a percentage of what you have in it.

A fund charges for running itself — managers, administration, the index licence — and states the total as a yearly percentage of assets. At 0.5%, a holding worth $10,000 costs about $50 a year.

You never receive a bill: the cost is taken out of the fund's assets bit by bit, so it shows up as a slightly lower value. Because it is taken every year from the whole amount, a small difference grows large over decades.