Investment Fee Calculator - See How Fees Reduce Your Returns

Many managed mutual funds, index funds and exchanged-traded funds charge fees to cover the costs of managing and administering the fund. Some funds charge a one-time sales fee (called load) when you buy the fund. And some funds charge a one-time redemption fee when you sell the fund.

All funds charge an annual fee (usually called the expense ratio) that is a percentage of the current dollar value of your holdings. Annual fees can be as low as 0.10 percent for passively-managed funds or nearly two percent or more for some actively-managed funds.

Annual fees are particularly onerous because the dollar amount that you pay increases as the value of your holdings increases. Here is an example that shows the impact of annual fees on the overall return of an investment. Assume that you invested $10,000, held it for 10 years at a 6 percent annual rate of return. Paying no fees, you would have $17,908.48. With a two percent annual fee, you would have $14,632.53, an 18.29 percent reduction due to fees.

Now take the same $10,000 and hold it for 30 years at 6 percent return. With no fees, you would have $57,434.91. With a two percent annual fee, you would accumulate $31,329.84, a 45.45 percent reduction. So the two percent annual fee cut your total return almost in half!

Form Input

On the calculator form, enter only numbers (with or without decimal points).

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Investment Fee Calculator
Initial Investment Amount:	$
Sales Load:	%
Annual Operating Fee:	%
Redemption Fee:	%
Rate of Return:	%
Number of Years Held:

Calculator Results
Fund Value Without Fees
Total Fees
Annual Operating Fees
Opportunity Costs
Redemption Fee
Fund Value With Fees
Reduction of Future Value Due to Fees

Computational Notes:

Each year the calculator computes the annual gain and then it computes the annual operating costs. The annual operating fee is equal to the value of the investment multiplied by the annual fee rate.

Opportunity costs (future dollars you give up because of a charge or fee) result from the up-front sales charge and the operating fee that is charged each year. The opportunity cost for the sales charge is the future value of the sales charge dollar amount invested at the specified rate of return for the holding period minus one year.

Each year you are charged an operating expense, which you could have invested. The opportunity cost for that fee is the future value of the fee had it been invested at the specified rate of return for the remainder of the holding period. The total opportunity cost for annual operating expenses is the sum of the individual opportunity cost for each year.

The total opportunity cost is the sum of the sale charge opportunity cost plus the total opportunity cost of the annual operating expenses minus the total of the actual annual fees.

The redemption fee is a one-time charge equal to the redemption rate multiplied by the value of the fund at the end of the last year of the holding period.

Related Articles:

Mutual Fund Fees
Mutual Fund Hidden Expenses - They Can Rob You
Mutual Fund Hidden Fees Can be Very High
Negotiate Your Mutual Fund Sales Charges

Posted January 5, 2008