Article1 min read
The Hidden Cost of a 1% Fund Fee
A fee that looks small takes nearly a quarter of a portfolio over thirty years. Here is how the math works.
- By
- Lynktor Editorial Team
- Reviewed by
- Lynktor Research Desk
- Updated
A small number with a long reach
A fund's expense ratio is charged every year on your whole balance, not on your gains. That makes it easy to underestimate.
Take $100,000 invested for 30 years with a 7% gross return. In a fund charging 0.05%, it grows to about $750,600. In a fund charging 1%, it grows to about $574,300. The higher fee costs about $176,000.
| Year 0 | Year 10 | Year 20 | Year 30 | |
|---|---|---|---|---|
| 0.05% fee | $100,000 | $195,798 | $383,368 | $750,626 |
| 1% fee | $100,000 | $179,085 | $320,714 | $574,349 |
Why fees compound
Every dollar paid in fees is a dollar that no longer earns returns for the rest of the holding period. Over decades, the lost growth is far larger than the fee itself.
Returns are uncertain. Fees are guaranteed.
How to check what you pay
- Look up each fund's expense ratio on the provider's fact sheet.
- Check for advisory or platform fees charged on top.
- Compare with low-cost index funds or ETFs that track the same market.
A higher fee can be worth it if it buys something you need, such as advice you would not otherwise get. Just make it a deliberate choice.
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