Expense ratio of an ETF included in the price or calculated separately
The expense ratio reduces the return of the ETF; your scenario of paying 100.0015 is that of a load.  Most (all?) ETFs can be bought without paying a load (sales charge as a percent of amount invested), and some ETFs can be bought without paying a brokerage fee (fixed or variable charge for a buy transaction just like buying any other stock  through the brokerage) because the brokerage has waived it.  Your broker  might charge fees for both buying and selling shares in an ETF, but in any case, this is quite separate from the expense ratio.
Stock price = Earning per share * P/E Ratio. Most of the time you will see in a listing the Stock price and the P/E ration. The calculation of the EPS is left as an exercise for the student Investor. ETF is essentially a stock, from accounting perspective. Treat it as just another stock in the portfolio. Yes you should take in the expenses being incurred by the mutual fund. This  lists down the fees charged by the mutual fund and where expenses can be found in the annual statement of the fund. To calculate fees and expenses. As you might expect, fees and expenses vary from fund to fund. A fund with high costs must perform better than a low-cost fund to generate the same returns for you. Even small differences in fees can translate into large differences in returns over time. You don't pay expenses, so the money is taken from the assets of the fund. So you pay it indirectly. If the expenses are huge, that may point to something i.e. fund managers are enjoying at your expense, money is being used somewhere else rather than being paid as dividends. If the expenses are used in the growth of the fund, that is a positive sign. Else you can expect the fund to be downgraded or upgraded by the credit rating agencies, depending on how the credit rating agencies see the expenses of the fund and other factors. Generally comparison should be done with funds invested in the same sectors, same distribution of assets so that you have a homogeneous comparison to make. Else it would be unwise to compare between a fund invested in oil companies and other in computers. Yes the economy is inter twined, but that is not how a comparison should be done. See my comment for some discussion of why one might choose an identical fund over an ETF.  As to why someone would choose the higher cost fund in this instance ... The Admiral Shares version of the fund (VFIAX) has the same expense ratio as the ETF but has a minimum investment of $10K.  Some investors may want to eventually own the Admiral Shares fund but do not yet have $10K.  If they begin with the Investor Shares now and then convert to Admiral later, that conversion will be a non-taxable event.  If, however, they start with ETF shares now and then sell them later to buy the fund, that sale will be a taxable event. Vanguard ETFs are only commission-free to Vanguard clients using Vanguard Brokerage Services.  Some investors using other brokers may face all sorts of penalties for purchasing third-party ETFs.  Some retirement plan participants (either at Vanguard or another broker) may not even be allowed to purchase ETFs. From Wikipedia -  To calculate the value of the S&P 500 Index, the sum of the adjusted   market capitalization of all 500 stocks is divided by a factor,   usually referred to as the Divisor. For example, if the total adjusted   market cap of the 500 component stocks is US$13 trillion and the   Divisor is set at 8.933 billion, then the S&P 500 Index value would be   1,455.28. From a strictly mathematical perspective, the divisor is not canceling out the units, and the S&P index is dollar denominated even though it's never quoted that way. A case in point is that the S&P is often said to have a P/E, and especially an E, the earnings attributed to one 'unit' of S&P. And if you buy a mutual fund sporting a low expense ratio, you can invest exactly that much money (the current S&P index value) and see the dividends accrue to your account, less the fee. Why don't you look at the actual funds and etfs in question rather than seeking a general conclusion about all pairs of funds and etfs?  For example, Vanguard's total stock market index fund (VTSAX) and ETF (VTI).  Comparing the two on yahoo finance I find no difference over the last 5 years visually.  For a different pair of funds you may find something very slightly different.   In many cases the index fund and ETF will not have the same benchmark and fees so comparisons get a little more cloudy.  I recall a while ago there was an article that was pointing out that at the time emerging market ETF's had higher fees than corresponding index funds.  For this reason I think you should examine your question on a case-by-case basis.  Index fund and ETF returns are all publicly available so you don't have to guess. The fund should be reporting returns net of expenses, so your interpretation is right; it made something like 0.42% (which sounds plausible, based on current yields on short-term securities), and the 0.05% is what's left after expenses. I've never seen a regular mutual fund report raw returns before expenses.  If one does, the my personal opinion would be that they're trying to snooker you, as that number isn't actually representative of anybody's actual returns.   If you look carefully, you should be able to find a table that reports several kinds of adjusted returns for the fund: As to what happens if a fund can't earn enough returns to cover its expenses, in that case the value of the fund shares will decrease.  This happens from time to time with riskier funds.  It shouldn't happen with a money market fund because both the returns and the expenses are fairly predictable, so the fund managers should be able to avoid it, unless they get caught up in a major crisis like the 2008 banking crisis.  In ordinary times, a money market fund managers who couldn't keep expenses below income would find themselves looking for a new job fairly quickly. Finally, for what it's worth, 0.37% is a really high expense ratio for a money market fund.  If you were to shop around, you could easily find comparable funds with expenses less than half that. You do realize that the fund will have management expenses that are likely already factored into the NAV and that when you sell, the NAV will not yet be known, right? There are often fees to run a mutual fund that may be taken as part of managing the fund that are already factored into the Net Asset Value(NAV) of the shares that would be my caution as well as possible fee changes as Dilip Sarwate notes in a comment. Expense ratios are standard for mutual funds, yes. Individual stocks that represent corporations not structured as a mutual fund don't declare a ratio of how much are their costs, e.g. Apple or Google may well invest in numerous other companies but the costs of making those investments won't be well detailed though these companies do have non-investment operations of course. Don't forget to read the fund's prospectus as sometimes a fund will have other fees like account maintenance fees that may be taken out of distributions as well as being aware of how taxes will be handled as you don't specify what kind of account these purchases are being done using. I was emailing back and forth with a manager in a different department on how real returns are being calculated, and he said that the industry standard is 1 + real returns*(1+inflation) - fees, and to not use my formula because it can double count inflation, making fees lower. However, real returns are not observable in the future, and I do not why he uses that formula. The returns were used in an Excel spreadsheet.   What are your thoughts about this? The ETF price quoted on the stock exchange is in principle not referenced to NAV. The fund administrator will calculate and publish the NAV net of all fees, but the ETF price you see is determined by the market just like for any other security.  Having said that, the market will not normally deviate greatly from the NAV of the fund, so you can safely assume that ETF quoted price is net of relevant fees. The quant aspect '''''. This is the kind of math I was wondering if it existed, but now it sounds like it is much more  complex in reality then optimizing by evaluating different cost of capital. Thank you for sharing "One other thing to consider, particularly with Vanguard, is the total dollar amount available.  Vanguard has ""Admiralty"" shares of funds which offer lower expense ratios, around 15-20% lower, but require a fairly large investment in each fund (often 10k) to earn the discounted rate.  It is a tradeoff between slightly lower expense ratios and possibly a somewhat less diverse holding if you are relatively early in your savings and only have say 20-30k (which would mean 2 or 3 Admiralty share funds only)." As BrenBarn stated, tracking fractional transactions beyond 8 decimal places makes no sense in the context of standard stock and mutual fund transactions.  This is because even for the most expensive equities, those fractional shares would still not be worth whole cent amounts, even for account balances in the hundreds of thousands of dollars. One important thing to remember is that when dealing with equities the total cost, number of shares, and share price are all 3 components of the same value.  Thus if you take 2 of those values, you can always calculate the third: (price * shares = cost, cost / price = shares, etc).  What you're seeing in your account (9 decimal places) is probably the result of dividing uneven values (such as $9.37 invested in a commodity which trades for $235.11, results in 0.03985368550891072264046616477394 shares).  Most brokerages will round this value off somewhere, yours just happens to include more decimal places than your financial software allows. Since your brokerage is the one who has the definitive total for your account balance, the only real solution is to round up or down, whichever keeps your total balance in the software in line with the balance shown online. Should you care? From Vanguard: The long-term impact of investment costs on portfolio balances   Assuming a starting balance of $100,000 and a yearly return of 6%, which is reinvested Check out this chart, reflecting the impact of relatively small expense ratios on your 30 year return:  All else being equal you should very much care about expense ratios. You end up with a significantly smaller amount if your pre-expense return is the same. A 0.75% difference in ER compounds to 20% over 30 years. If so, how should I take them into consideration when comparing funds? I'm in the U.S. if that matters. If they track the same index, cheaper is better. The cases where higher expense ratios might be better are if you believe that index will outperform the market by enough to recoup the cost of the ER.  There is significant research that most funds do not do this. Thanks very much.  12b1 is a form that explains how a fund uses that .25-1% fee, right? So that's part of the puzzle im getting at.  I'm not necessarily trying to understand my net fees, but more who pays who and based off of what.   For a quick example, betterment bought me a bunch of vanguard ETFs. That's cool. But vanguard underperformed vs their blackrock and ssga etfs. I get that vanguard has lower fees, but the return was less even taking those into account.  I'm wondering, first what sort of kickback betterment got for buying those funds, inclusive of wholesale deals, education fees etc.  I'm also wondering how this food chain goes up and down the sponsor, manager tree.  I'm sure it's more than just splitting up that 1%