UNDERSTAND THE RESULT
The calculation, explained clearly
Investment charges can look small when expressed as an annual percentage, yet the long-run effect includes both money deducted and growth that deducted money can no longer earn. This calculator compares the same starting balance and monthly deposits along two paths: one using the gross return and one applying the annual asset-based fee entered by the user.
Use the comparison to understand scale, not to rank or recommend a product. Real funds, advisers and platforms can calculate fees in different ways. Some charges are fixed, tiered, transaction-based or embedded in prices, so a single annual percentage cannot represent every cost structure.
When this calculator helps
- Compare two otherwise similar long-term scenarios with different annual expense ratios.
- Estimate how the effect of an ongoing fee changes when the holding period becomes longer.
- Separate the visible ending-balance gap from the percentage of the no-fee comparison that was lost.
How to use it
- Enter the starting balance, monthly deposit and the gross annual return used for both paths.
- Enter the annual asset fee shown by the product or scenario and select the number of years.
- Compare the after-fee balance, no-fee balance and fee-drag chart; then verify the product’s actual fee method before acting.
Method and interpretation
The no-fee path converts the gross annual growth factor to a monthly rate and applies it to the starting balance and monthly deposits. The after-fee path multiplies the annual growth factor by (1 − annual fee) before converting that combined factor to a monthly rate. Both paths receive the same deposits at month-end.
Fee drag equals the no-fee ending balance minus the after-fee ending balance. It is not a statement of the exact fees charged on an account statement. The difference contains modeled charges and the compounded return that those removed amounts would otherwise have earned.
The percentage shown divides fee drag by the no-fee ending balance. The chart and data table use the same yearly schedule as the headline comparison, making it possible to inspect when the gap begins to widen.
Assumptions and limits
- The gross return and annual fee stay constant for the entire period.
- The fee is modeled as an annual proportion of assets, not as a fixed, tiered or transaction charge.
- Taxes, spreads, commissions, advice fees and product-specific deductions are excluded unless represented by the annual fee input.
- Currency selection is presentation only and does not change the numerical scenario.
Frequently asked questions
What does an annual investment fee mean here?
It is modeled as a percentage applied through the annual growth factor. Check whether the real figure is an expense ratio, advisory fee, platform fee or another charge, because each provider may apply costs differently.
What is fee drag?
Fee drag is the difference between the modeled no-fee balance and after-fee balance. It includes both deducted value and the future compound growth no longer earned on that value.
Does a 1% fee simply reduce a 7% return to 6%?
This calculator combines annual growth and fee factors multiplicatively, so the result is close to but not always exactly the same as subtracting percentage points. Actual providers may accrue fees daily or monthly using another method.
Which costs are not included?
Fixed account charges, bid–ask spreads, trading commissions, performance fees, tax, foreign exchange costs and tiered pricing are excluded unless you translate them into the single annual percentage yourself.
Why does the fee gap accelerate over time?
A fee reduces the amount that remains invested. In later periods, the account misses growth on earlier deductions as well as paying new modeled fees, so the difference can compound even when the annual percentage stays unchanged.