Expense Ratio Calculator (compare two fund fees over time)

Understanding the expense ratio calculator — concept and principle

This calculator compares two funds that differ only in their expense ratio. With the same starting amount, monthly contributions, return before fees and time, it shows each fund's final balance, the difference, the balance with no fees, how much each fund loses to fees, the total you put in and the net return of the more expensive fund. Use it to see the long-run cost of fund fees.

A fee 0.7 points higher, compounded for 25 years, leaves fund B $32,898 behind fund A.

How it is calculated

Net yearly return = (1 + return) × (1 − expense ratio) − 1.
Monthly rate i = (1 + net return)^(1/12) − 1.
Balance = P(1 + i)^n + C((1 + i)^n − 1) ÷ i, with starting amount P, monthly contribution C and n months.
Lost to fees = balance with no fees − balance with fees.

Sales loads and trading costs are not included.

The principle

A fund's expense ratio is taken from its assets every year, so it reduces the return you actually receive. Because returns compound, a small yearly fee compounds too: you lose not only the fee itself but the growth that money would have earned. Over decades, a difference of less than one percentage point a year can add up to a large share of the final balance. The SEC's investor bulletin on fees makes the same point with similar examples.

Worked example

Default inputs: $10,000 start, $300 a month, 7% before fees, fund A 0.05%, fund B 0.75%, 25 years.

Fund B net return = 1.07 × 0.9925 − 1 ≈ 6.2% a year.
Fund A final balance ≈ $286,661.99; fund B ≈ $253,763.60.
Difference = $32,898.38 in favour of fund A.
No-fee balance ≈ $289,186.89, so A loses ≈ $2,524.90 and B ≈ $35,423.29 to fees.
Total put in = 10,000 + 300 × 300 = $100,000.

Each point is the calculator re-run with only “Years invested” changed; the gold point is the default example. Change the inputs above and this chart follows your numbers.

Years invested	Difference in final balance (A − B)
6.25	$1,291.15
12.5	$5,335.41
18.8	$14,517.43
25	$32,898.38
31.2	$67,287.83
37.5	$128,964.65
50	$419,765.86

How to read the result

The difference is what the higher fee costs you over the period, including lost growth. If two funds track the same index or strategy, the cheaper one usually wins over time. A higher fee is only worth it if the fund reliably earns more after costs, which is hard to know in advance.

Common mistakes

Thinking a 0.7% fee costs 0.7% of the final balance in total; it compounds every year.
Ignoring sales charges, account fees and trading costs.
Comparing funds with different investment strategies on fees alone.
Assuming the return before fees is guaranteed.

Keep in mind: Returns vary and are not guaranteed. Check each fund's prospectus for all fees. This is not investment advice.

Frequently asked questions

What is an expense ratio?

The yearly cost of running a fund, expressed as a percentage of its assets.

Is a 0.75% expense ratio high?

For a broad index fund it is high; many index funds charge far less. Compare funds with similar strategies.

Why does a small fee matter so much?

It reduces the return every year, and that lost return would itself have compounded.

Sources: U.S. SEC, Investor Bulletin "How Fees and Expenses Affect Your Investment Portfolio" (2014)

Checked 9 Nov 2026. U.S. Securities and Exchange Commission, Office of Investor Education and Advocacy, Investor Bulletin “How Fees and Expenses Affect Your Investment Portfolio” (2014); future value of a lump sum and monthly annuity.

Your numbers