After Reimbursement Expense Ratio

Owning a mutual fund comes with charges. Annual ones. Every fund will have expenses, which are taken out of the investor's holdings periodically. These expenses are reported to investors as an expense ratio, giving the amount as a percentage of the total assets. The charges cover things like management costs, fees, and operating expenses.

But the news isn't all bad. Along with taking out money for expenses, some funds also give some money back in the form of reimbursements.

There can be several reasons for this. One of the more prominent purposes of these payments is to keep the expense ratio below a certain amount. Some funds seek to limit expenses in order to make the funds more attractive to buyers. These so-called capped funds use reimbursements to lower the expense ratio. Particular mutual funds can reimburse specific fees or reward long-time holders by giving them a reimbursement after they have stayed invested in a fund for a minimum number of years.

The lowered ratio is reported as "after-reimbursement" so that investors can better track what's going on.