Yes, and the effect is much bigger than it sounds. A 1% annual expense ratio doesn’t just cost you 1% of your money once; it compounds against you every single year, quietly eating into returns that would otherwise be growing on top of each other.
Here’s the math: if you invest $100,000 for 30 years at an 8% market return with a 0.05% expense ratio (typical for a low-cost index fund), you’d end up with roughly $990,000. Swap in a 1.05% expense ratio, and the same investment grows to only around $760,000. That 1% difference in fees costs you over $230,000 in this example, money that simply never had the chance to compound.
This is why fee comparisons matter even when the percentage difference looks tiny on paper. A fund charging 1.2% instead of 0.2% isn’t “1% more expensive” in any meaningful sense; over multiple decades, it can mean giving up a large fraction of your total nest egg.
Want to see the real dollar impact on your own investment timeline? Try our ETF Expense Ratio Impact Calculator to compare fees side by side.