When investing in mutual funds, you'll undoubtedly hear a lot about a fund's expense ratio. Everybody will tell you that you should look for a fund with a low expense ratio but not all expense ratios are created equal. There are several components that go into the fund's final expense ratio and some of them may affect you differently. The largest component of an expense ratio is the fee that's paid to the fund's managers. They're managing your money for you and they need to be paid for it. Even with an index fund there is periodic portfolio rebalancing and managing the fund's cash position that requires a fee. In addition, the expense ratio may include an additional fee that covers things such as recordkeeping, account maintenance and legal fees incurred by the fund. Although typically a m