About this calculator
This calculator is for education only and does not constitute investment advice. It runs the same investment at the same assumed return through two different annual fees, year by year, so you can see what the fee really costs. The assumed return is an assumption for comparison, not a forecast or a promise. Past returns do not guarantee future results, and the fund with the lower fee is not automatically the better fund.
Fees are charged on the grown balance each year, which is the detail that makes them compound: a dollar paid in fees in year 1 is a dollar that earns nothing for the remaining nineteen years. That is why the value gap between the two funds ends up larger than the gap in fees actually paid — the fee gap is what left the account, the value gap is what left plus all the growth it would have earned.
How to use it
- Enter the initial investment, the assumed annual return, and the number of years.
- Enter the two annual fees — fund A is the lower-fee fund, fund B the higher-fee one. Swap them if you like; the labels follow the numbers.
- Read the final values and the fees paid for each fund, plus the two gaps: extra fees paid to fund B, and extra value kept with fund A.
- Use the year-by-year table to see when the gap starts to bite — it is small early on and accelerates with time.
The formula
Because the fee is taken after growth each year, each year multiplies the balance by (1 + return) × (1 − fee rate), so the closed form is the initial amount times that factor to the power of n. Total fees are the sum of the yearly deductions, not the difference between the no-fee value and the final value — that difference is larger, because it also includes the growth the paid fees would have earned. No contributions, withdrawals, taxes, bid-ask spreads or trading costs are included; a real fund’s total cost of ownership is higher than its headline fee.
Worked example
$10,000 at an assumed 7% a year for 20 years, fund A at 0.10% and fund B at 1.00%: with no fee at all the value would be $38,696.84. Fund A ends at $37,930.22 after $433.56 in fees; fund B ends at $31,650.42 after $3,906.57 in fees. Fund B costs $3,473.01 more in fees — but fund A keeps $6,279.80 more value, because the extra fees also removed nineteen-plus years of compounding. After just one year the gap is small ($10,689.30 vs $10,593.00); by year 5 it is $13,955.53 vs $13,338.13.
Sources: Year-by-year simulation: balance × (1 + assumed return), then fee = grown balance × fee rate, deducted annually. No contributions, withdrawals, taxes or trading costs are modelled; all inputs are entered by you. Last updated: October 2026.
Frequently asked questions
Why is the value gap bigger than the fee gap?
Because fees compound. The fee gap counts only the dollars that left the account as fees. The value gap also counts the growth those dollars would have earned had they stayed invested. Over 20 years at 7%, that lost growth nearly doubles the headline fee difference in the example.
Is the assumed return a forecast?
No. It is a single assumption applied equally to both funds so the fee comparison is clean. Real returns vary year to year, and a fund’s past return says nothing reliable about its next twenty years — past returns do not guarantee future results.
Does the lower-fee fund always win?
Not necessarily. This calculator isolates fees; it says nothing about what each fund holds, its risk, or its returns before fees. A higher-fee fund could still end ahead if its pre-fee returns are higher by more than the fee difference — compare net returns, not fees alone.
What costs are missing here?
Contributions and withdrawals, taxes on distributions and gains, bid-ask spreads, trading costs inside the fund, and any platform or advice charges. The headline fee is the largest recurring cost for most index funds, but it is not the whole cost of owning a fund.
What formula does this fund fee calculator use?
Each year: balance = balance × (1 + return); fee = balance × fee rate; balance = balance − fee. After n years: final value = initial × [(1 + return) × (1 − fee rate)]ⁿ; total fees = Σ yearly fees Because the fee is taken after growth each year, each year multiplies the balance by (1 + return) × (1 − fee rate), so the closed form is the initial amount times that factor to the power of n. Total fees are the sum of the yearly deductions, not the difference between the no-fee value and the final value — that difference is larger, because it also includes the growth the paid fees would have earned. No contributions, withdrawals, taxes, bid-ask spreads or trading costs are included; a real fund’s total cost of ownership is higher than its headline fee. The worked example on this page applies the formula step by step with real numbers, so you can verify the result by hand.