How much will that added expense ratio potentially hurt your investment growth? Find out here with our interactive Expense Ratio Calculator!
Comparing 2 similar ETFs or Mutual Funds and want to see how much an increase in expense ratios will inhibit your investment growth?
Simply enter 2 different expense ratios, along with basic investment information and find out.
Don’t know where to find a fund’s expense ratio? Scroll down to our section where we show you where to find this information.
Shown below is an example. Enter your own numbers in the grey boxes in the calculator below and see the results.
How to Use Our Expense Ratio Calculator
For example, if you have $10,000 currently invested, and add $5,000 per year at a return of 6% – over the next 30 years the difference in funds with a 0.1% expense ratio and one with a 0.75% expense ratio will amount to $51,000!:
Shocking isn’t it?
How does it get so high? The truth is you lose more than just what you pay each year in expenses, you also lose the ability for the fees that you paid to compound! If you pay $1,000 in fees, that is $1,000 less that grows and compounds for the rest of your life!
How to Find a Lower Expense Ratio Mutual Fund or ETF
Ready to find ways to find better, low-cost ETFs and Mutual Funds? Ready reduce your expense ratios and save yourself some money?
- Check out our Fund Spotlight Series where we highlight low cost ETFs and Mutual Funds
About this calculator:
The calculator computes an investment’s return using the Future Value function in Microsoft Excel. The “Cost” is derived by subtracting the Future Value function result factoring in the expense ratio from a Future Value function result that assumes zero cost.
In other words, if you input 6% for investment return and an expense ratio of 0.5%, the “Cost” is the difference between and 6% return and a 5.5% return over the period.
This assumes that any added expense ratio does not add any potential for out performance. This should only be used to compare similar investments.
Want to learn more?
Start With the Basics
An Expense Ratio is the fee charged by a fund (either a mutual fund or ETF) for managing the fund’s assets. A fund’s expense ratio is listed as a percentage, and represents the percent of your investment that you are charged for investing in the fund.
We have a little explainer video here:
How to Find a Fund’s Expense Ratio
If you are trying to find this information for an ETF or mutual fund, start by either looking at the fund’s prospectus, fact sheet, webpage, or on a site such as Morningstar. Here are a few examples for the ETF SPY – S&P 500 index fund:
Publications for SPY can be found on the fund’s webpage: SPY Webpage
Click on Fact Sheet, and you will see the fund’s costs and be able to plug it into the calculator above.
Or, this information should be listed on the fund’s website as well. Although heads up! – Some companies (typically those that charge very high expenses for their funds!) will not publish the fund’s expense ratio openly on the fund’s site. You will have to look through the fund’s prospectus or other documents (almost like they are hiding something…hmm).
But SPY makes it easy to find the fund’s expenses to plug in our calculator:
Lastly, if you are having trouble finding the fund’s website or prospectus, try a site like Morningstar that collects data from thousands of ETFs and mutual fund:
How Much Do High Expense Ratios Cost Investors?
Investors pay hundreds of millions of dollars in investment related fees every year.
When you calculate the savings on your investments in the expense ratio calculator above, you are looking at relatively small numbers. But consider the impact of higher investment related costs in the entire financial industry…
Just for example, look at Vanguard’s Total Bond Market ETF (Ticker: BND). It is currently the cheapest total bond fund, with an expense ratio of 0.035%.
According to Vanguard, the average total bond today has an expense of 0.67%:
Now consider that Vanguard’s Total Bond Fund currently has $224.4 billion in assets under management (AUM).
That means investors in Vanguard’s Total Bond Fund pay about $78.5 million in fees each year ($224.4 billion x 0.035%).
If that $224.4 billion was invested in a fund with an expense ratio of 0.67% instead of 0.035%, investors would be paying $1.5 billion in fees – more than $1.45 billion more!
So as you can see, as the “fee war” between fund providers rages on, investors benefit tremendously. Just Vanguard’s Total Bond Fund alone results in billions of dollars staying in investors’ accounts every year.
This is why low cost investing has become so popular over the last decade. As Morningstar has shown in a recent blog post, hundreds of billions of dollars have been moving from high cost funds to lower cost alternatives:
So get out there and find areas to reduce these investment related expenses in your portfolio! Our expense ratio calculator will help!
Good luck, and happy investing!
