Mutual Fund Expense Ratio Impact Calculator

How to calculate expense ratio impact?

The expense ratio is deducted daily from the fund's assets, reducing your net annual return by that percentage.

Formula: Net Return = Gross Return - Expense Ratio

Using the Expense Ratio calculator: an example

Example: Initial $10,000 investment, 7% expected return, and a 1.0% expense ratio over 20 years.

Step-by-step calculation:

1. Calculate the net annual return (7% - 1% = 6%)
2. Compute the future value at the gross rate (7%) to find potential wealth
3. Compute the future value at the net rate (6%) to find actual wealth
4. Subtract the net value from the gross value to find the total fee cost

Frequently Asked Questions

What is a 'good' expense ratio?

For index funds, a good ratio is often below 0.10%. Active funds typically range from 0.50% to 1.50% or more.

Do these fees include trading commissions?

No, the expense ratio covers management and administrative costs, but not individual brokerage transaction fees.

Does a high fee mean better performance?

Statistically, higher fees are often a predictor of lower net returns for investors over long periods.