How it works
An expense ratio describes recurring fund operating costs relative to fund assets. This calculator subtracts the entered annual ratio from an effective annual gross return to approximate the after-fee growth path.
The formula
Keep currency, units and time periods consistent. Percentage inputs use percentage points (enter 5 for 5%). Results are rounded only for display; tiny nonzero values may use scientific notation. Undefined ratios are shown as unavailable.
$50,000 for 20 years at a 7% annual gross return gives $193,484.22. Using a 0.20% expense-ratio approximation gives $186,378.18, a $7,106.05 long-term value difference.
Calculation method
Monthly contributions use the equivalent monthly growth rate derived from each annual path. The same deposits and timing are applied to the no-fee, primary-fee and comparison-fee scenarios so the modeled difference isolates fees.
Interpretation
Fund expenses are reflected continuously in net asset value rather than deducted as one annual line item. The long-term value difference includes foregone growth and is not a ledger of cash fees actually charged. Trading commissions, spreads and taxes are excluded.
Limitations
A lower expense ratio alone does not establish a better investment. The comparison deliberately assumes the same gross return for both funds, although real funds may hold different assets, track different benchmarks or carry different risks.
Method and reference sources
Method and content checked 2026-09-20. These sources provide background, not endorsement or professional certification. The formula and limitations above define this calculator.
- Investor.gov — Compound Interest CalculatorGrowth, contribution and time-horizon context; this site does not forecast investment returns.
- Investor.gov — Understanding FeesInvestment fee and compounding context; enter the terms of your fund or account.
Frequently asked questions
Why can the cost impact exceed the fees deducted?
Fees also reduce capital available for future compounding. The tool compares modeled paths using an annual fee approximation; actual daily deductions and returns can differ.
What is a worked example for ETF / Fund Expense Ratio?
$50,000 for 20 years at a 7% annual gross return gives $193,484.22. Using a 0.20% expense-ratio approximation gives $186,378.18, a $7,106.05 long-term value difference.