How it's calculated
Fees charged as a percentage of assets are taken out of your balance little by little. The calculator works month by month:
1. Growth: B = B · (1 + R)^(1/12) R = annual return before fees
2. Fee: fee = B · f / 12, B = B − fee f = annual fee (% of assets)
3. Deposit: B = B + monthly contribution (end of month)
Closed form, with m = (1 + R)^(1/12) · (1 − f/12) and N = 12 · years:
FV = P · m^N + c · (m^N − 1) / (m − 1)
Total cost of a fee = (balance with 0% fee) − (balance with the fee)
= fees actually paid + growth those fees would have earned
- The return you enter is the effective annual return before fees. With a 0% fee, $1,000 at 6% becomes exactly $1,060 after a year.
- Fund expense ratios are actually accrued daily inside the fund price; advisory fees are often billed quarterly. Charging f/12 each month is a close, standard approximation.
- Check against the SEC: the SEC's investor bulletin "How Fees and Expenses Affect Your Investment Portfolio" says $100,000 growing 4% a year for 20 years ends at approximately $208,000 with a 0.25% annual fee, $198,000 with 0.50% and $179,000 with 1.00%. This calculator gives $208,424.99, $198,256.89 and $179,379.03.
- Fees are assumed constant, no taxes, loads or trading costs. The return is constant every year.
Worked examples
1. The SEC's example
$100,000, 4% a year before fees, 20 years. At a 0.25% fee: $208,424.99 (fees paid: $7,394.63). At 1.00%: $179,379.03 (fees paid: $27,224.98). The difference is $29,045.96. Load this example
2. Index fund vs. 1% fee, monthly saving
$500 a month for 30 years at 7% before fees. At a 0.05% expense ratio you end with $578,994.96; at 1.00%, $481,571.37. That's $97,423.59 less, even though the fees you directly paid at 1% were "only" $52,476.15: the rest is growth those fees would have earned. Load this example
3. Adding a 1% advisory fee on top of fund costs
$250,000 for 25 years at 6% before fees. Funds alone at 0.20%: $1,020,634.18. Funds plus a 1% advisory fee (1.20% total): $794,754.71, a difference of $225,879.47. Whether advice is worth that is a personal decision; this shows the price. Load this example
Frequently asked questions
How much does a 1% fee cost over 30 years?
It depends on the balance and returns, but it is usually far more than 1% of your money. In example 2 above (saving $500 a month at 7% before fees), a 1% fee instead of 0.05% leaves about 17% less money after 30 years (roughly $97,000 less).
What is an expense ratio?
The annual percentage of a fund's assets used to pay its operating costs. A 0.10% expense ratio costs $10 a year per $10,000 invested. It is taken out of the fund automatically, so you never see a bill, but it lowers your return.
How do I compare an expense ratio and an advisory fee?
Add every fee charged as a percentage of assets: fund expense ratio + advisory fee + any wrap or platform fee. Enter the total for each option you're comparing as Fee A and Fee B.
Why is the "total cost" bigger than the fees I paid?
Because every dollar paid in fees also stops growing. The total cost compares your balance with what you would have had at a 0% fee, so it includes both the fees and the growth they would have earned.
Does this include trading costs, loads or taxes?
No. It models ongoing percentage-of-assets fees only. One-time sales loads, commissions, bid-ask spreads and taxes would reduce returns further.