Fund Fee Calculator: See What Fees Cost You Over Time

Compare the annual fees of two funds and see how much a few tenths of a percent add up to over time.

The annual fee is the price you pay to own a fund or ETF. Compare two funds with the calculator and see what the difference in fees costs you over the whole time you invest.

The annual fee is the ongoing price you pay to own a fund. You may see it called the ongoing charges figure, the TER or the expense ratio. Whatever the name, it is the fund's total annual cost: all its ongoing costs per year, as a percentage of your holding. The fee is taken straight out of the fund's value, so you never see it on a bill. But you pay it every year on all of your money, which is why the cost grows as your savings grow. The calculator shows what the difference in fees between two funds means for your final value.

How to use the calculator

Enter your starting amount, your monthly contribution, the annual market return you expect and the annual fee of the two funds you want to compare. The calculator shows the final value of both funds and the difference between them, which is what the more expensive fund actually costs you over the period.

How the calculator works

Both funds get exactly the same contributions and the same return before fees. Each year, that year's contributions are added, the balance grows by the expected market return, and finally the annual fee is deducted from the whole value. The difference between the two final values therefore comes from the fees alone, and it grows with compound interest: money paid in fees in year one would otherwise have earned a return in every year that followed.

Example: 0.5% vs. 1.5%

With the calculator's default numbers, €100,000 to start, €2,500 a month and a 7% annual market return over 30 years:

• Fund with a 0.5% annual fee: final value about €3,397,000
• Fund with a 1.5% annual fee: final value about €2,733,000
• Difference: about €664,000

In this example, a single percentage point in annual fees costs more than €650,000, or about a fifth of the whole final value. That is why the fee is one of the most important things to look at when you choose a fund: you know it in advance, and you pay it whether the fund delivers a return or not.

How to choose a fund with the fee in mind

Only compare funds that invest in the same market, and look up their ongoing charges in the factsheet or in the fund list at your bank or broker. A more expensive fund can be worth the money if it gives you access to something you cannot get more cheaply, but historically, low fees have been one of the most reliable signs of good long-term returns.

A few things that are easy to miss:

• Transaction costs are reported separately from the annual fee. A fund that trades a lot can cost more than its fee suggests.
• Currency hedging and similar extras also cost money, often a few tenths of a percent.
• You pay the fee every year, even in years when the fund loses money. That is why it builds up such a large difference over time.

To see the general effect of compound interest, try the compound interest calculator. To find out what you actually own inside your funds, and whether two of them hold the same companies in practice, run your holdings through the portfolio x-ray.

Sources

The calculator uses the fees and returns you enter yourself and does not fetch any outside fund data. The fee levels mentioned above are typical ranges for funds sold to private investors in Europe; the actual fee for a given fund is in its factsheet.

Frequently asked questions

What is a fund's annual fee?

The annual fee is the ongoing price of owning a fund, measured as a percentage of your holding per year. It covers management, administration and similar costs, and it is taken out of the fund's value as you go. You never get a bill; the cost shows up as a slightly lower return.

What is the difference between the management fee, ongoing charges and TER?

The management fee is what the fund company charges for running the fund. The ongoing charges figure, also called the TER or, in the US, the expense ratio, is a broader measure that also covers administration, custody and audit costs. On top of that come the fund's transaction costs when it buys and sells securities, which are reported separately. Always compare the same measure between two funds.

What is a normal fee for a fund?

Broad index funds and ETFs often charge between 0.1% and 0.4% a year, and some charge even less, while actively managed equity funds often charge between 1% and 1.5%. A difference of one percentage point sounds small, but over a couple of decades it can cost you a six-figure sum in lost final value.

How much does one percentage point in fees matter?

With €100,000 to start, €2,500 a month and a 7% annual return over 30 years, a fund with a 0.5% annual fee ends at about €3.4 million, while a fund with a 1.5% fee ends at about €2.7 million. The difference is about €664,000, caused by the fee alone.

Where do I find a fund's fee?

The fee is listed in the fund's factsheet and key information document, or in the prospectus for US funds. Banks and online brokers also show it in their fund lists, and fund comparison websites let you compare ongoing charges and past returns across funds and ETFs.

Is the cheapest fund always the best?

Not necessarily, but the fee is one of the few things you know in advance, while future returns are uncertain. If you pay a high fee, the fund should give you something for the money, such as a strategy or a market you cannot get more cheaply. Always compare funds that invest in the same thing.