Investment fee calculator
What a percentage point of fees actually costs over a working life, against a low-cost alternative.
What the higher fee costs you
$189,867
15.6% of the final balance, from a fee gap of 0.90 points
- Balance at 1.1%
- $1,030,848
- Balance at 0.2%
- $1,220,715
- Share lost to fees
- 15.55%
| Gross return | 7% |
|---|---|
| Fee | -1.1% |
| Net return | 5.9% |
- A fee gap above half a point compounds into a large share of the final balance.
A 0.9 point fee gap on this balance costs well over a hundred thousand across 25 years — roughly a fifth of the final balance.
Side by side
How this is calculated
Fees come out of the return
The fee is subtracted from the gross return before compounding, so a 7% return at a 1.1% fee compounds at 5.9%. The lost amount is not the fee itself but everything that fee would have gone on to earn.
net return = gross return − feeWhy the damage looks disproportionate
A 1.1% fee sounds like 1.1% of the balance. Over 25 years at a 7% gross return it removes closer to 20% of the final balance, because each year’s fee also removes every future year of growth on that money.
Worked example: $80,000 plus $1,000 a month, over 25 years
| Balance | $80,000 |
|---|---|
| Monthly | $1,000 |
| Gross return | 7% |
| Fees | 1.1% vs 0.2% |
| At 0.2% | the larger balance |
|---|---|
| At 1.1% | materially smaller |
| Cost of the gap | about a fifth of the total |
The fee difference is smaller than most people’s monthly coffee spend as a percentage, and larger than most people’s house deposit in absolute terms.
What this assumes
- The gross return is the same in both cases.
- The fee is charged as a flat annual percentage.
- No performance fees or transaction costs.
- No tax on gains along the way.
Where this commonly goes wrong
- The headline management fee is rarely the whole cost: platform fees, transaction costs and a bid-ask spread all sit on top of it.
- Percentage fees compound with the balance, so the annual cost in dollars rises every year even when the rate never changes.
- A higher-fee fund has to beat a lower-fee one by the fee gap every single year just to draw level.
Questions
How much difference does a 1% fee make?
Over 25 years at a 7% gross return, roughly a fifth of the final balance. The intuition that 1% costs 1% is wrong because each year’s fee also removes every year of growth that money would have earned afterwards.
What is a reasonable fee for an index fund?
Broad index funds and ETFs are widely available between 0.03% and 0.25%. Above about 0.5% for a plain index exposure, you are paying for distribution rather than management.
Are higher fees ever worth paying?
Only where the strategy genuinely cannot be replicated cheaply. For mainstream equity and bond exposure, decades of data show that the fee is the most reliable predictor of relative performance, and it points the wrong way.
Do fees show up in my statement?
Usually not as a line item. Fund fees are deducted from the unit price, so the balance is already net of them and the cost is invisible. That is precisely why comparing two funds’ published fee figures matters.
What about adviser fees on top?
They stack. A 1% adviser fee on top of a 0.7% fund fee is 1.7% of return gone every year. Judge the combined figure, and judge whether the advice is worth it in the same terms this page uses.
Does this include platform or account fees?
Only if you add them into the fee percentage. Flat-dollar account fees hurt small balances far more in percentage terms, so convert them to a percentage of your own balance before entering them.
Related tools
Sources
This calculator does arithmetic on the figures you enter. It does not account for tax, fees, or your personal circumstances.
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