Glossary
Basis Point
Definition
A basis point is one one-hundredth of a percentage point, so 100 basis points equal 1%.
The unit exists to avoid ambiguity: if a fee rises "by 1%," it is unclear whether 0.50% became 0.505% or 1.50%. Saying it rose 100 basis points is exact. Fund expenses, advisory fees, and interest-rate moves are all commonly quoted this way.
Why it matters in practice
Small-sounding basis-point differences compound. A fund charging 75 basis points (0.75%) versus one charging 5 basis points (0.05%) costs an extra $700 a year on a $100,000 balance — every year, on a growing base. Converting basis points into annual dollars is one of the fastest ways to see what an investment actually costs.
Related terms: Expense Ratio · Yield · AUM (Assets Under Management) · Index Fund
Glossary definitions are educational and general. They are not investment, legal or tax advice, individual circumstances vary, and simplified definitions necessarily omit edge cases. Figures, limits and rules cited change over time — confirm current rules before acting. Aduna Capital LLC is a California DFPI-registered investment adviser (CRD #311270). Aduna Capital LLC is not affiliated with, endorsed by, or sponsored by CalSavers, the California State Treasurer's Office, CalPERS, CalSTRS, or any other retirement system, employer or school district named on this page.