What "total expense ratio" means in ETFs?

Question

QQQQ (Nasdaq 100) ETF has an total expense ratio of 0.2%
SPY (S&P 500) 0.1%
DIA (Dow Jones) 0.17%

What the "total expense ratio" means?
How it works?

Answer 1

The expense ratio here are the expenses incurred by the company making the ETF available to trade. It goes to the costs incurred in balancing their portfolio to replicate/mirror the indexes it represents.

What's interesting about those ratios, is that the ETF index ratios are some of the LOWEST of any group of stocks. In fact, if you try to buy a QQQQ, SPY, or DIA mutual fund, you'll find those companies take a much bigger chunk out of YOUR pocket!

Hope that helps!

Answer 2

The total expenses of the fund as a % of its total assets. The lower the number the better. Mutual funds have much higher expense ratios than ETF's.