A 1% fee sounds small. But fees are charged every year on your whole balance, including all the growth you have built up, so they compound against you. Over a few decades the difference between a low-cost index fund and a high-fee fund or advisor can be six figures. This calculator puts a dollar amount on that drag.
How this calculator works
An expense ratio is an annual percentage of assets that a fund deducts to cover its costs. You never see a bill — the fund's returns are simply lower by that amount. Advisory fees charged as a percentage of assets work the same way.
The calculator subtracts each fee from your expected return and projects your balance with monthly contributions under each scenario, plus a no-fee baseline.
The gap between the two balances is the cost of the higher fee. The 'share of growth lost' shows how much of your potential ending balance the higher fee consumes.
The formula
FV = P(1 + r_net)^n + C × ((1 + r_net)^n − 1) / r_net, r_net = (R − F) ÷ 12- R
- annual return before fees
- F
- annual fee or expense ratio
- P
- starting balance
- C
- monthly contribution
- n
- months invested
Worked example
You have $50,000 invested, add $500 a month and expect 7% a year before fees over 30 years.
In a fund charging 0.05%, your net return is 6.95% and you end with roughly $975,000. In a fund charging 1%, your net return is 6% and you end with about $790,000.
That one-percentage-point difference costs you around $185,000 — far more than the fees you would add up by hand, because every dollar paid in fees also loses all of its future growth.
Tips
- Find a fund's expense ratio on its fact sheet or in the prospectus summary.
- Broad-market index funds and ETFs from major providers often charge under 0.10%.
- Check your 401(k) plan's fund menu; the lowest-cost option is often an S&P 500 or target-date index fund.
Frequently asked questions
What is a good expense ratio?
For broad index funds, under 0.20% is generally considered low, and many charge 0.03%–0.10%. Actively managed funds often charge 0.50%–1.00% or more.
How are expense ratios charged?
They are deducted from the fund's assets daily and reflected in its share price. You do not pay them directly, which is why they are easy to overlook.
Is a 1% advisory fee worth it?
It can be if the advisor helps you avoid costly mistakes, plan taxes or manage complex finances. Compare the dollar cost shown here with the value of the services you actually use.
Do higher fees mean better performance?
Research such as S&P's SPIVA reports consistently finds that most actively managed funds underperform their index benchmarks over long periods, often largely because of fees.