Expense ratio drag calculator
See how much of your final balance an annual fund fee takes over a holding period, in dollars and as a share of the gross result. It compares two runs of the same compounding formula, one at your gross return and one at the return minus the fee, exactly as worked out in the expense ratio article.
Why a fraction of a percent matters
The fee is charged every year on the whole balance, including the growth your earlier contributions produced. So it compounds against you on the same schedule your returns compound for you. The gap starts invisible and ends large, which is why the number to look at is not the fee but the share of the final balance it removes.
Assumptions
- Contributions are added at the end of each year. Monthly contributions land slightly higher.
- The fee is modelled as a reduction in annual return, the standard approximation.
- No taxes, no trading costs, no cash drag, constant return every year. Real sequences vary; see sequence of returns.
- Illustration only, not advice. See the disclaimer.