A worked example
$10,000 invested plus $300 a month at an 8% gross return over 30 years grows to about $556,465 with no fees — but a 1% expense ratio cuts that to roughly $447,156, a difference of more than $109,000 from that single percentage point.
Frequently asked questions
Why does a 1% fee end up costing so much more than 1% of my balance?
An expense ratio is deducted every single year from the whole balance, including all the growth that balance has already earned — so the fee itself compounds right alongside your returns, growing in dollar terms the longer you're invested.
What's a typical expense ratio?
Index funds often charge well under 0.5%, sometimes under 0.1%. Actively managed funds commonly charge 0.5% to 1.5% or more. Even a seemingly small difference compounds into a large gap over a multi-decade investing horizon.
Does a higher expense ratio always mean worse performance?
Not necessarily in any single year, but on average, lower-cost funds have tended to outperform higher-cost funds net of fees over long periods, since fees are a guaranteed drag while outperformance from active management is not.
This calculator provides estimates for general informational purposes only and is not financial advice. Actual investment returns are not guaranteed.