Investment Fee Calculator

An expense ratio is the annual fee a mutual fund or ETF charges, expressed as a percentage of your investment. A 1% expense ratio means you pay $1,000 per year on every $100,000 invested. It's deducted automatically from the fund's returns, so you never see an invoice, but you pay it every single year.

The cost is far larger than most people expect because fees compound against you while returns compound for you. On a $100,000 portfolio with $6,000 in annual contributions, growing at 8% gross return: a 0.05% expense ratio (typical index fund) grows to about $972,000; a 1.25% expense ratio (typical actively managed fund) grows to about $728,000. That's a $244,000 difference from fees alone, roughly 25% of total wealth lost to costs.

Low-cost index funds: Vanguard Total Stock Market ETF (VTI) charges 0.03%; Fidelity ZERO funds charge 0.00%. Typical actively managed US equity mutual fund: 0.5% to 1.5% per year. Target-date funds: 0.10% to 0.75%. The gap between a 0.03% index fund and a 1% active fund seems small per year, but over 30 years of compounding it is the single largest controllable factor in long-term wealth building.

The evidence strongly says no. S&P SPIVA studies consistently show that over 10+ year periods, 80-90% of actively managed funds underperform their benchmark index after fees. The fee drag is the primary reason: a manager needs to consistently beat the market by their expense ratio just to match index-fund returns net of fees. The few who do beat their index in one period rarely maintain it in the next.