How this number is made
An expense ratio is a percent of assets taken each year. It does not feel large. Compounded, it is the gap between the balance at the gross return and the balance at the gross return minus the fee.
- Use the expense ratio from the fund, not a one-time commission.
- The gross return is an assumption before that fee.
Formula
Each year the balance grows by the return, the contribution is added, and the fee version uses return minus the expense ratio.
Worked example
With the figures already in the form, given up to the expense ratio is $73,489.
Questions
Are loads included?
No. A front load reduces the amount invested on day one. This page is the annual drag only.
Do cheap funds always win?
A low fee cannot rescue a fund that does not own what you wanted. The fee gap is still real.