Fund Expense Ratio Impact Calculator

Fund expense ratio impact calculator for long-term investing decisions

A fund’s expense ratio looks small on paper, but it is charged every year on the value of your investment. That means the fee can grow as your balance grows. Over long time horizons, the fee does not just reduce your return once. It can reduce how much money stays invested, which reduces how much can compound in future years.

This calculator is built for one decision: estimating how much a fund’s annual expense ratio may reduce your ending balance over time compared with a no-fee baseline, using your assumptions for starting amount, time horizon, and expected return. If you contribute monthly, it also estimates how fees affect contributions as they accumulate.

The results are meant to be practical. You get the projected ending value with fees, the ending value with no fees, the difference between the two, and an estimate of total fees paid over the period. This makes it easier to judge whether a low-cost fund could meaningfully improve your long-term outcome, even if performance before fees is similar.

Assumptions and how to use this calculator

• Returns are modeled as a steady monthly compound rate derived from your annual return assumption. Real markets fluctuate and results will differ.
• The expense ratio is modeled as a monthly fee charged on assets (annual expense ratio divided by 12), taken after monthly growth for simplicity.
• Monthly contributions are assumed to be added at the start of each month before growth and fees for that month.
• Taxes, transaction costs, bid-ask spreads, and adviser fees are excluded. This is about the fund’s stated expense ratio only.
• Fees are estimates from a simplified model. Actual fee drag depends on daily accrual, exact pricing, and timing of contributions.

Common questions

Is the expense ratio a one-time fee or an annual fee?

It is an ongoing annual cost expressed as a percentage of assets. Even though it is quoted per year, it is typically accrued continuously and reduces the fund’s net asset value over time.

Why does a small expense ratio create a big difference over decades?

Because it reduces the amount that remains invested. Lower invested balance means less compounding in future periods. The longer the horizon, the more the gap can widen between a higher-fee and lower-fee option.

Does a higher expense ratio always mean a worse fund?

No. Some strategies cost more to run, and some higher-fee funds can outperform before fees. This calculator isolates the fee effect only. Use it to understand the hurdle a higher-fee fund must clear to justify its cost.

What annual return should I enter?

Use your best estimate of the fund’s long-term return before fees, not a single recent year. If you are unsure, use a conservative range and rerun the calculator. Overconfidence in return assumptions is usually the bigger error than minor fee modeling differences.

What if I do not know my monthly contribution amount?

Leave it blank or set it to 0. The calculator will still estimate fee impact on your initial amount. If you later decide on a contribution amount, rerun it because contributions can materially change the total fees paid and the ending balance.