Quick answer
This calculator grows one amount at the same return in two funds, then takes each fund's expense ratio out every year. It shows both ending values, the gap between them and the estimated fees each fund deducted, so you can see how a yearly fee adds up [1].
Key points
- An expense ratio is a fund's yearly operating cost, shown as a percentage of its assets.
- Fees come out of the fund's assets, so they lower your balance instead of arriving as a bill.
- Each year the calculator applies growth first, then removes the expense ratio.
- The gap between two funds grows larger than the fees alone, because money paid in fees stops compounding.
- The return is held fixed and identical for both funds — a simplification.
#What does this calculator compare?
Most mutual funds and ETFs charge yearly operating costs. The SEC describes these as "Total Annual Fund Operating Expenses", expressed as a percentage of the fund's average net assets and known as the expense ratio [2]. They are paid from fund assets, so when they come out "the value of the fund decreases" along with every investor's shares [2].
The calculator has five inputs: Amount invested, Annual return before fees, Fund A expense ratio, Fund B expense ratio and Years. It returns the ending value of Fund A, the ending value of Fund B, the difference between them, and the estimated total fees each fund took. You can look up a real fund's expense ratio in its prospectus — see how to read a fund prospectus.
#How does the calculation work?
Write the yearly return before fees as r and the expense ratio as e, both as decimals (6% = 0.06; 0.05% = 0.0005). Starting from the amount invested, each year:
- Grow the balance: grown = balance × (1 + r).
- Work out that year's fee: fee = grown × e.
- Take the fee out: new balance = grown − fee, which is the same as balance × (1 + r) × (1 − e).
- Repeat for every year, separately for Fund A and Fund B.
Estimated fees for each fund are the sum of the yearly fee amounts. Difference = the gap between the two ending values (the larger minus the smaller), shown as a positive number. This yearly method reproduces the SEC's own example: $100,000 growing at 4% for 20 years ends near $208,000 with a 0.25% fee, $198,000 with 0.50% and $179,000 with 1.00% [1]. Our Python check gives $208,413, $198,211 and $179,213.
Worked example
Worked example: a 0.05% fund vs a 1.00% fund
Amount invested $10,000 · Annual return before fees 6% · Fund A expense ratio 0.05% · Fund B expense ratio 1.00% · Years 30. Calculated in Python with the yearly method above.
- Fund A ending value
- $56,579.61
- Fund B ending value
- $42,484.63
- Difference (A − B, as Fund A ends higher)
- $14,094.98
- Estimated fees taken by Fund A
- $415.12
- Estimated fees taken by Fund B
- $6,970.39
Fund B deducted about $6,555 more in fees than Fund A, yet ended about $14,095 lower. The extra gap is growth that the fee money never earned.
Hypothetical fixed 6% return for both funds, before taxes and any sales charges. Not a forecast.
| Years | Fund A (0.05%) | Fund B (1.00%) | Difference |
|---|---|---|---|
| 10 | $17,819.14 | $16,196.11 | $1,623.03 |
| 20 | $31,752.16 | $26,231.38 | $5,520.78 |
| 30 | $56,579.61 | $42,484.63 | $14,094.98 |
Gap between the two funds over time
#What this calculator leaves out
- Other costs. Shareholder fees such as sales loads, redemption fees and account fees are charged directly to you and are not included [2]. Neither are advisory fees or trading costs.
- Taxes. Distributions and gains may be taxed; the tool ignores taxes completely.
- Inflation. Ending values are in future dollars.
- Different or changing returns. Both funds get the same fixed return every year. Real funds hold different investments, returns vary year to year, and an expense ratio can change.
#How should you read the difference?
The SEC points out that a fund with higher costs "must perform better than a lower-cost fund to generate the same returns for you" [2]. That is what the gap shows: Fund B needs a higher return before fees just to keep up. A fee is not the only thing that matters when comparing funds, but it is one of the few numbers you know in advance. For the bigger picture, read expense ratios and fund fees.
What's the bottom line?
A yearly fee looks tiny as a percentage, but it is taken from a growing balance every year, and the money it removes stops compounding. This calculator makes that visible by holding everything else fixed. Use the result to ask better questions about costs, alongside what a fund invests in — see index funds explained and the compound interest calculator.
Frequently asked questions
Is the fee taken before or after growth each year?
After. Each year the balance first grows by the return before fees, then the expense ratio is applied to that grown balance.
Why is the difference bigger than the fees paid?
Money removed as fees in early years would have kept growing. The difference counts both the fees and the growth those dollars missed.
Where do I find a fund's expense ratio?
In the fee table near the front of the fund's prospectus, listed as total annual fund operating expenses. Fund websites and FINRA's Fund Analyzer also show it.
Does a lower expense ratio mean a better fund?
Not on its own. Funds differ in what they hold and how risky they are. The calculator only shows what the fee difference would do if everything else were equal.
Sources
Grade A = primary source (regulator, government agency, official rulebook or the index provider's own documents). Numbers in brackets in the text point here.
- U.S. SEC — Investor.gov. How Fees and Expenses Affect Your Investment Portfolio – Investor Bulletin (2026). Accessed 2026-10-03.A
- U.S. SEC — Investor.gov. Mutual Fund and ETF Fees and Expenses – Investor Bulletin (2026). Accessed 2026-10-03.A
This page is general education, not personal financial, tax or legal advice. Figures in worked examples are hypothetical and calculated before taxes and fees unless stated. Rules and limits change; check the linked primary sources for the current version. How we check every page.
