Investment Fee Calculator - See How Fees Reduce Your Returns
any managed mutual funds, index funds and exchange-traded funds (ETFs) 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!
Use the Investment Fee Calculator to see the effect of fees on total returns.