T/07Tool

Fund fees

Compare a cheap index fund with an expensive one, or a Direct plan with a Regular plan. Small yearly fees add up to large sums.

Compare two funds

Monthly investment

Years investing

Market return, before fees

Cheap fund's yearly fee

Broad index funds often charge 0.03–0.2% (US) or 0.1–0.3% (India, Direct plan).

Expensive fund's yearly fee

Actively managed funds often charge 1% or more. In India, a Regular plan costs more than the Direct plan of the same fund.

The higher fee costs you

$25,129

That is 13% of what you could have had, from a fee difference of just 0.90% a year. The fee is taken every year, from your whole balance, so it grows along with your money.

Fees cost you: $25.1K
Cheap fund: $187.1K; 0.10% a year
Expensive fund: $162K; 1.0% a year
You put in: $60K

Same money, different fees

You put in
Cheap fund
Expensive fund

Both lines invest the same amount each month in the same market. Only the fee differs.

01Method

How this works.

Both funds grow month by month with balance = balance × (1 + (r − fee) ÷ 12) + monthly. The only difference between them is the yearly fee.

What it assumes

The fee (expense ratio) is taken out of the return every year, which is how funds charge it.
Both funds earn the same market return before fees. Expensive funds rarely beat cheap ones for long.
No taxes, exit loads, or one-off charges.
In India, the Direct and Regular plans of one fund hold the same investments; Regular adds a distributor commission to the fee.

Worked example

Invest $200 a month for 25 years in a market returning 8% a year. A fund charging 0.1% ends at about $187,143; one charging 1% ends at about $162,014. The higher fee costs you $25,129.

Invest ₹17,000 a month for 25 years in a market returning 8% a year. A fund charging 0.1% ends at about ₹1,59,07,157; one charging 1% ends at about ₹1,37,71,219. The higher fee costs you ₹21,35,938.

Learn the idea behind it

Terms used here: Expense ratio, Index fund, Mutual fund, Active investing.

Every number here is a simplified illustration based on the inputs you choose. Returns are not guaranteed and real markets vary — sometimes a lot — year to year. This is education, not financial advice.