A small difference in expense ratio doesn’t feel like much year to year, but compounded over decades it can quietly cost you thousands of dollars. Compare two funds tracking a similar strategy to see what the fee difference actually costs.
How It’s Calculated
Each fund’s net annual return is estimated by subtracting its expense ratio from the gross return you expect before fees: Net Return = Gross Return − Expense Ratio. That net return is then compounded over the number of years you enter: Future Value = Initial Investment × (1 + Net Return / 100) ^ Years. For example, with a $10,000 initial investment, a 7% expected gross return, and 25 years, a fund charging 0.03% grows to about $53,895, while a fund charging 0.75% grows to about $45,522 — a difference of roughly $8,373 driven entirely by the fee gap.
A Note on This Comparison
This calculator assumes both funds earn the same gross return before fees — in reality, returns can differ for reasons unrelated to cost, such as tracking error or slight differences in holdings. Expense ratios are published in each fund’s prospectus and can change over time, so treat this as an illustration of how fee drag compounds rather than a precise forecast. The comparison also doesn’t account for other cost differences between funds, like bid-ask spreads, trading commissions, or tax efficiency, which can matter just as much as the stated expense ratio.