How ETF Expense Ratios Affect Adjusted Price Returns

Summary

The document asks whether adjusted closing prices for ETFs or mutual funds account for fund expense ratios, in the context of comparing returns from market data. The response explains that fund expenses are deducted from the fund’s assets over time, reducing its net asset value and therefore affecting its price and investor returns. On that basis, the respondent says there is no need to subtract the expense ratio manually when working with ETF prices.

The explanation distinguishes fund-level operating expenses from visible account charges such as trading commissions. It gives no data source comparison, calculation example, or discussion of how adjusted prices handle distributions and splits beyond the question’s premise. The answer is therefore a general accounting explanation; exact return analysis still depends on the fund and the price series being used.

Key ideas

• ETF operating expenses are deducted from fund assets over time.
• Those deductions are reflected in the fund’s net asset value and market price.
• The response says investors generally should not subtract the expense ratio again from ETF price returns.
• Expense ratios differ from visible trading commissions or account service charges.

Tags

# Does Adjusted Closing Price take account the Expense Ratio?


# Does Adjusted Closing Price take account the Expense Ratio?












first time posting at Quantitative Finance.

I am trying to use the yfinance python library to load various ETF's data and compared the return.

I understand the adjusted closing price handles the effect of dividend and stock split. I wonder in the case of ETF or mutual fund, does the adjusted closed price takes care of the expense ratio? I tried to Google but got no definite answer.

If not, what is the best way to deal with the effect of expense ratio on return?

Many Thanks,

## Answer by amdopt (score 2)

https://quant.stackexchange.com/a/47344

You don't have to back out the expense ratio manually. The expenses are deducted from the ETF NAV and baked into the price of the ETFs.

From the link below:

> You won't find them on your account statement The cost of investing is usually associated with trading commissions and account service fees—items you see as "debits" from your accounts. But expense ratios are less obvious because they're not itemized on your account statements or confirmations. Instead, each fund's expenses are deducted from its total value on a regular basis. And those expenses cut directly into your investment returns.

Expense ratios: What they are & how they work

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.