A 1% fee doesn’t sound like much.
Enter your numbers and see exactly what a small difference in fund fees does to your ending balance once compounding has time to work.
Your investment
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Your results will show up here
Fill in your numbers above and click “Calculate Results” to see a full comparison, chart, and year-by-year table.
Year-by-year comparison
| Year | Fund A | Fund B | Difference |
|---|
How this calculator works
What is an expense ratio?
An expense ratio is the annual fee a fund charges to cover its management and operating costs, shown as a percentage of your investment. A 0.05% expense ratio means you pay 50 cents a year for every $1,000 invested; a 1% expense ratio means you pay $10. The fee is deducted automatically from the fund’s returns, so you never see a separate bill — but it still reduces the amount that compounds over time.
How this calculator works
This tool simulates two investments side by side using the same starting amount, monthly contribution, and expected annual return. The only difference is the expense ratio. Each month we add your contribution, apply the expected return, then subtract that month’s fee — repeated for every month of your chosen time horizon.
Assumptions
- The annual return you enter is treated as constant every year — real markets go up and down.
- Contributions are added at the end of every month, without interruption.
- The expense ratio is applied as an even monthly drag.
- Both funds are assumed to have identical gross performance before fees.
Limitations
- Doesn’t account for taxes, which can meaningfully change real-world outcomes.
- Doesn’t account for currency conversion if you invest in a currency different from your own.
- Doesn’t include other costs like brokerage commissions, spreads, or account fees.
- Doesn’t model market volatility or the order in which good and bad years occur.
Educational disclaimer: this tool is for education only. It does not constitute financial, investment, or tax advice, and it isn’t a recommendation to buy or sell any specific fund. Confirm each fund’s actual expense ratio in its official prospectus, and speak with a licensed financial advisor before making investment decisions.
Frequently asked questions
What counts as a low expense ratio for an index fund?
Many broad-market index funds now charge between 0.02% and 0.10% a year. Actively managed funds commonly charge 0.5% to 1.5% or more. Below roughly 0.20% is generally considered inexpensive for a passively managed fund.
Does a 1% fee really make that big a difference?
Yes, mainly because of compounding. A 1% fee doesn’t just cost you 1% of your balance once — it costs you 1% of a balance that would otherwise keep growing, every year, for as long as you hold the investment.
Should I always pick the fund with the lowest expense ratio?
Cost is one of the most reliable predictors of long-term performance, but it isn’t the only factor. It’s still worth checking what index a fund tracks, its tracking error, and its trading liquidity.
How often is the expense ratio actually charged?
It isn’t billed to you directly — it’s deducted continuously from the fund’s assets and reflected in its daily share price, which is why this calculator applies it as a smooth monthly drag rather than a one-time annual charge.
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