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Expense Ratio Impact Calculator

Grows an initial investment with optional annual contributions at a gross return minus a fund's expense ratio, compares it with a lower-cost alternative, and reports the total fee cost and its share of the final value.

When to use

You want to see how much a fund's annual expense ratio costs over decades, or compare two funds with different fees on the same investment plan.

Do not use when: You need a plain growth projection without fees (use compound-interest) or a comparison including loads, trading costs and taxes. Informational only; not financial advice.

Formula

net = (annual_return_percent − expense_ratio_percent)/100; V_0 = initial_investment; V_t = V_{t−1} × (1 + net) + annual_contribution; final_value_with_fees = V_years; the comparison uses comparison_expense_ratio_percent; total_fee_cost = final_value_with_comparison − final_value_with_fees

Fees are modelled as a constant reduction of the annual return (the SEC's Investor.gov illustration uses the same approach); contributions are made at the end of each year and returns are assumed constant. Informational mathematics only; not financial advice.

Inputs

ParameterTypeUnitRequiredDescription
initial_investmentnumberyesAmount invested at the start. Range: ≥ 0, ≤ 1000000000000
annual_contributionnumberdefault 0Amount added at the end of each year. Range: ≥ 0, ≤ 10000000000
yearsintegeryearsyesInvestment horizon. Range: ≥ 1, ≤ 100
annual_return_percentnumber% per yearyesExpected return of the underlying assets before fees. Range: ≥ -50, ≤ 100
expense_ratio_percentnumber% per yearyesAnnual fund fee as a percent of assets (e.g. 1 for 1.00 %). Range: ≥ 0, ≤ 20
comparison_expense_ratio_percentnumber% per yeardefault 0Fee of the alternative fund; 0 shows the cost against a fee-free benchmark. Range: ≥ 0, ≤ 20

Outputs

OutputTypeUnitDescription
total_contributionsnumberinitial_investment + annual_contribution × years.
final_value_with_feesnumberValue after `years` at the net return (gross − expense ratio).
final_value_with_comparisonnumberSame plan at gross − comparison_expense_ratio.
total_fee_costnumberfinal_value_with_comparison − final_value_with_fees (fees paid plus the growth they would have earned).
fee_cost_percent_of_finalnumber%total_fee_cost / final_value_with_comparison × 100.
effective_annual_return_percentnumber%annual_return_percent − expense_ratio_percent.

Example

10,000 for 30 years at 7 %, 1 % fee vs no fee: {"initial_investment":10000,"years":30,"annual_return_percent":7,"expense_ratio_percent":1} → {"total_contributions":10000,"final_value_with_fees":57434.91,"final_value_with_comparison":76122.55,"total_fee_cost":18687.64,"fee_cost_percent_of_final":24.55,"effective_annual_return_percent":6}

50,000 plus 6,000 a year for 25 years at 8 %, 0.75 % vs 0.05 %: {"initial_investment":50000,"annual_contribution":6000,"years":25,"annual_return_percent":8,"expense_ratio_percent":0.75,"comparison_expense_ratio_percent":0.05} → {"total_contributions":200000,"final_value_with_fees":681068.81,"final_value_with_comparison":773927.69,"total_fee_cost":92858.87,"fee_cost_percent_of_final":12,"effective_annual_return_percent":7.25}

GET https://tttkmbb.com/api/v1/calculate/expense-ratio-impact?initial_investment=10000&years=30&annual_return_percent=7&expense_ratio_percent=1

Machine access

Sources

FAQ

Why does a 1 % fee cost about a quarter of the final value?

The fee is charged every year on the whole balance, and the money taken out stops compounding; over 30 years at 7 % the balance at 6 % net ends 24.5 % lower.

Is the fee subtracted from the return exactly?

Nearly: funds accrue the expense ratio daily on assets, which is very close to lowering the annual return by the ratio. Trading costs inside the fund and any sales loads are extra.

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