Question 1

Why does a 1% fee cost so much more than 1% of my balance?

Accepted Answer

Because it's charged every year against your whole balance, including the growth that balance would otherwise have kept compounding. A fee taken out in year one doesn't just cost you that dollar amount — it costs you that dollar amount plus everything it would have earned for every remaining year.

Question 2

What's a typical expense ratio?

Accepted Answer

Broad index funds commonly run 0.03%–0.20%. Actively managed mutual funds often run 0.5%–1.5% or more. The gap between the two, compounded over decades, is usually the single biggest controllable factor in long-term investment cost.

Question 3

Does this include sales loads or other fees?

Accepted Answer

No — this isolates the expense ratio's compounding cost specifically. Some funds also charge one-time sales loads or transaction fees on top of the ongoing expense ratio, which this calculator doesn't account for.

Mutual Fund Expense Ratio Cost Calculator

Gross return vs. net return, compounded

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