Expense Ratio Comparator
e.g. low-cost index fund
e.g. active fund / high TER
Fund A (0.1% ER)
$446,638
Total fees paid: $3,198
Fund B (1% ER)
$394,035
Total fees paid: $29,337
Over 20 years, the 0.90% higher expense ratio in Fund B costs you $52,603 in final portfolio value.
| Year | Fund A (0.1%) | Fund B (1%) | Difference |
|---|---|---|---|
| 1 | $17,316 | $17,192 | $124 |
| 3 | $34,301 | $33,663 | $638 |
| 5 | $54,988 | $53,369 | $1,619 |
| 7 | $80,184 | $76,945 | $3,239 |
| 9 | $110,873 | $105,153 | $5,720 |
| 11 | $148,251 | $138,901 | $9,350 |
| 13 | $193,776 | $179,277 | $14,499 |
| 15 | $249,224 | $227,583 | $21,641 |
| 17 | $316,758 | $285,378 | $31,380 |
| 19 | $399,014 | $354,524 | $44,489 |
| 20 | $446,638 | $394,035 | $52,603 |
About
The Expense Ratio Comparator shows the real cost of fund fees over time. Even a seemingly small difference between a 0.10% index fund and a 1.00% actively managed fund can amount to tens of thousands of dollars over a 30-year investment horizon due to compounding. Enter the same investment amount and time horizon for two funds with different annual expense ratios and an assumed gross return. The tool projects the final portfolio value for each fund and highlights the total fee drag — the wealth you surrender to management costs.
How to use
- 1 Enter the initial investment amount and monthly contribution (if any).
- 2 Set the assumed annual gross return rate (before fees).
- 3 Enter the expense ratio for Fund A (e.g. a low-cost index fund at 0.10%).
- 4 Enter the expense ratio for Fund B (e.g. an active fund at 1.00%).
- 5 Set the investment horizon in years.
- 6 Compare the final values, total fees paid, and the wealth difference between the two funds.
- What is an expense ratio and how does it affect my investment?
- An expense ratio (also called Total Expense Ratio or TER) is the annual fee a mutual fund or ETF charges as a percentage of assets under management. It is deducted daily from the fund's NAV, so you never see it as a separate charge — but it continuously reduces your returns. A fund with a 1% expense ratio returning 10% gross effectively returns only 9% to you. Over decades, this 1% drag compounds into a very large wealth difference.
- What is a good expense ratio for an index fund or ETF?
- Index funds and ETFs should have very low expense ratios — typically 0.03%–0.20%. In the US, major index ETFs (Vanguard, Fidelity, Schwab) charge 0.03%–0.10%. In India, index funds typically range from 0.10%–0.50%. Actively managed mutual funds charge 0.5%–2.5%. If an actively managed fund cannot consistently beat a comparable index fund net of its higher fees, the index fund is the better choice.
- Can a higher expense ratio ever be worth it?
- Only if the fund consistently outperforms net of its fees. Research shows that over long periods (10+ years), the majority of actively managed funds underperform their benchmark index after fees. A few exceptional fund managers do outperform, but identifying them in advance is difficult. For most investors, low-cost index investing is the optimal strategy — the fee difference compounds dramatically over a 20–30 year investment horizon.