Transparent method
The formula
Worked example
Example inputs
How to interpret the result
An annual fee expressed as a small percentage sounds negligible in the moment, but because it compounds against the balance every single year over a long holding period, the dollar cost it removes from an ending balance can end up being a substantial share of the total growth that balance would otherwise have reached.
Before you rely on it
What to check
Compare fee impact in actual future dollars removed from the ending balance over your real time horizon, not just the fee's small-looking annual percentage.
The common error
Where people go wrong with investment fee drag calculator
Judging an annual fee's impact by its percentage alone rather than its compounded dollar effect over a long horizon. A seemingly minor percentage difference between two fee structures can remove a large, very real amount of money by the end of a multi-decade holding period.
Sensitivity evidence
How gross annual return changes the estimated value lost to fees
| Gross annual return | Estimated value lost to fees | Ending value after fees |
|---|---|---|
| 5.0% | $72,052 | $266,584 |
| 6.0% | $90,552 | $338,635 |
| 7.0%worked example | $113,556 | $429,187 |
| 8.0% | $142,104 | $542,743 |
| 9.0% | $177,461 | $684,848 |
Every input, tested
Which input moves the estimated value lost to fees most
| Input | Tested from | To | Estimated value lost to fees at each end | Swing |
|---|---|---|---|---|
| Investment horizon | 19.0 years | 31.0 years | $59,093 to $205,701 | $146,608 (129%) |
| Annual fee | 0.750% | 1.3% | $87,521 to $138,159 | $50,638 (45%) |
| Gross annual return | 6.0% | 8.0% | $90,552 to $142,104 | $51,553 (45%) |
| Starting investment | $90,000 | $110,000 | $102,201 to $124,912 | $22,711 (20%) |
Two variables at once
Estimated value lost to fees by gross annual return and starting investment
| Gross annual return \ Starting investment | $80,000 | $100,000 | $120,000 |
|---|---|---|---|
| 5.0% | $57,641 | $72,052 | $86,462 |
| 6.0% | $72,441 | $90,552 | $108,662 |
| 7.0% | $90,845 | $113,556 | $136,267 |
| 8.0% | $113,683 | $142,104 | $170,525 |
| 9.0% | $141,968 | $177,461 | $212,953 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Starting investment | $100,000 |
| Gross annual return | 7.0% |
| Annual fee | 1.0% |
| Investment horizon | 25.0 years |
| Estimated value lost to fees | $113,556 |
| Ending value after fees | $429,187 |
Complete evidence
Full projection schedule
Show all 25 rows
| Period | Opening balance | Contribution | Growth | Ending balance |
|---|---|---|---|---|
| Year 1 | $100,000 | $0.00 | $7,000 | $107,000 |
| Year 2 | $107,000 | $0.00 | $7,490 | $114,490 |
| Year 3 | $114,490 | $0.00 | $8,014 | $122,504 |
| Year 4 | $122,504 | $0.00 | $8,575 | $131,080 |
| Year 5 | $131,080 | $0.00 | $9,176 | $140,255 |
| Year 6 | $140,255 | $0.00 | $9,818 | $150,073 |
| Year 7 | $150,073 | $0.00 | $10,505 | $160,578 |
| Year 8 | $160,578 | $0.00 | $11,240 | $171,819 |
| Year 9 | $171,819 | $0.00 | $12,027 | $183,846 |
| Year 10 | $183,846 | $0.00 | $12,869 | $196,715 |
| Year 11 | $196,715 | $0.00 | $13,770 | $210,485 |
| Year 12 | $210,485 | $0.00 | $14,734 | $225,219 |
| Year 13 | $225,219 | $0.00 | $15,765 | $240,985 |
| Year 14 | $240,985 | $0.00 | $16,869 | $257,853 |
| Year 15 | $257,853 | $0.00 | $18,050 | $275,903 |
| Year 16 | $275,903 | $0.00 | $19,313 | $295,216 |
| Year 17 | $295,216 | $0.00 | $20,665 | $315,882 |
| Year 18 | $315,882 | $0.00 | $22,112 | $337,993 |
| Year 19 | $337,993 | $0.00 | $23,660 | $361,653 |
| Year 20 | $361,653 | $0.00 | $25,316 | $386,968 |
| Year 21 | $386,968 | $0.00 | $27,088 | $414,056 |
| Year 22 | $414,056 | $0.00 | $28,984 | $443,040 |
| Year 23 | $443,040 | $0.00 | $31,013 | $474,053 |
| Year 24 | $474,053 | $0.00 | $33,184 | $507,237 |
| Year 25 | $507,237 | $0.00 | $35,507 | $542,743 |
Where the inputs come from
Starting investment is the current balance, gross return is the return before costs, and annual fee is the total ongoing charge as a percentage, including fund expenses, advisory fees and platform charges. Add them up: a 0.10% index fund plus a 1% advisory fee is 1.10%. Find fund fees in the prospectus or fact sheet and advisory fees in the client agreement. The horizon should match your holding period.
Using the estimated value lost to fees in a real decision
Even a quarter-point difference is large over decades.
When the result stops applying
The model deducts the fee from the return each year, but real fees may be charged on the balance in different ways and at different times. It ignores taxes and trading costs inside funds that do not appear in the stated expense ratio. It also assumes the gross return is the same regardless of the fee, although some higher-fee funds have performed better before fees.
What to compare it with
The expense ratio and ETF fee pages use the same math from the fund's point of view. Compare against a low-cost index fund by running the same balance at 0.05%. For the tax side, the after-tax investment return calculator shows how fees and taxes combine. Ask any advisor for the all-in cost in writing.
People also ask
Frequently asked questions
Why do small fees matter so much?
Fees are charged every year on the whole balance, including the growth, so they compound against you. A 1% fee takes a percentage of your returns forever, not just once.
What counts as an investment fee?
The fund's expense ratio, any advisory or management fee, platform or account fees, and sales loads. Trading costs inside funds are extra and not always shown.
Is paying an advisor worth it?
It can be, if the advice adds value through planning, behavior coaching and tax management that you would not manage alone, but a 1% fee needs to earn its cost every year.