How much will fund fees actually cost you?
A 1% expense ratio doesn't reduce your return by 1% — it compounds against you. Over 30 years it can eat 25-30% of your terminal wealth. Run your numbers and see what you're really paying.
How to use this in 30 seconds
- Look up your fund's expense ratio — it's on Morningstar, your broker's fund summary, or the fund prospectus. ETFs typically post it prominently. Express it in basis points or percent (0.50% = 50 bps).
- Set the gross return to 7-10% — 7% is a long-run real S&P benchmark, 10% is the nominal long-run stock average. Lower it if you want to stress-test conservative assumptions.
- Read the orange "lost to fees" number — that's the difference between your expected wealth and what could have been with the same return at 0% fees. It's larger than most people guess.
Quick rule: if your expense ratio is above 0.50%, the long-horizon drag is meaningful enough to comparison-shop. Below 0.20%, the marginal gain from chasing cheaper alternatives is small.
Why fees compound
A 1% fee isn't a 1% reduction. The arithmetic is straightforward but most people don't internalize it until they see the chart: every year, the fund deducts (expense ratio × portfolio value) before showing you the return. That deduction was capital that would have compounded if it had stayed in the account.
Over 30 years at 7% gross / 1% expense ratio, the net real return is roughly 6%. That sounds like a small difference, but starting from $10K + $500/month, the gap between 6% and 7% compounded over 30 years is about $230K — roughly 25-30% of the fee-free terminal.
This is the headline argument of low-cost indexing. Vanguard runs total-market funds at 0.03-0.04%. Average actively managed mutual funds in the US run 0.5-1.0%. The compounded difference is enough to delay retirement by years.
All math runs in your browser. We don't store your inputs. Source on github.
Where this framework breaks
- Net-of-fee return is what matters, not gross. If the active fund truly outperforms the index by more than its fee, the math reverses. The SPIVA scorecard says 90%+ of active funds underperform their index over 15 years — but if you're in the rare alpha-positive 10%, fees aren't pure dead weight.
- Tax-managed funds. A small expense ratio premium can be justified by tax-loss harvesting in a taxable account. The model doesn't price that.
- Asset class access. If a 0.50% fund is the only practical way to get exposure to a specific asset class (frontier markets, niche bonds, certain factor exposures), the comparison isn't against 0% — it's against not having that exposure at all.