ETF Expense Ratio Cost Calculator
See the yearly fee an ETF charges on your money and how much the expense ratio quietly costs over a holding period.
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Formula
How the calculation works
An expense ratio is charged as a slice of everything you hold, so the fee grows as your balance grows even though the percentage stays fixed.
The calculator compares two futures from the same starting amount, one compounding at the gross return and one at the gross return minus the fee.
The gap between those two end values is the true cost of the expense ratio, and it is much larger than a single year of fees.
Common mistakes
- Treating the expense ratio as a one off cost, when it is deducted every year and compounds against you over a long holding period.
- Comparing funds only on past returns, which are already quoted after fees and hide how much a high ratio is dragging on the result.
When to use it
- Use it when choosing between two index funds that track the same market, because the lower ratio usually wins over a long horizon.
- Do not use it for short trades where a few months of fees are tiny, since the compounding drag only becomes decisive over years.
Worked example
On 245000 invested with a 1 percent expense ratio and an 8 percent gross return over 10 years, the annual fee is 2450 and the fee cost over the period is about 46984.54.
Common questions
Why does a small expense ratio matter so much?
Because the fee is charged every year on the whole balance, so a 1 percent gap compounds into tens of thousands over a decade.
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