Expense Ratio Calculator

See how much a fund expense ratio can reduce a long-term investment balance.

Finance and MoneyUpdated 2026-10-203 min read

Expense Ratio Calculator

Ending balance after fees

...

Ending balance with no fee...

Total fee drag...

First-year fee...

What it does

An expense ratio is the annual cost of owning a fund, expressed as a percentage of assets. A 1.5% ratio means the fund deducts about $150 a year on a $10,000 balance. The fee is usually taken from the fund's assets, so you do not get a separate bill.

The effect compounds. A small annual fee reduces the balance, which reduces future returns, which reduces the balance further. Over 20 years, the difference between a 1.5% fund and a 0.5% fund can be several thousand dollars on a $10,000 investment.

This page follows the method used in the SEC's investor example. Each year, the investment grows by the gross return and then pays the expense ratio on the resulting balance. That makes the net growth factor (1 + r) x (1 - expense ratio). The default 1.5% ratio at a 5% gross return gives $19,611.49 after 20 years, which the SEC rounds to about $19,612.

The estimate is not a prediction. It holds the return and the fee constant, ignores taxes and trading costs, and assumes the fee is charged once a year. Real fund returns vary, and expense ratios can change. Use the result to compare funds with similar strategies, not to forecast a precise future balance.

How to use

Enter the amount you plan to invest.
Enter the expected annual return before fees.
Enter the fund's expense ratio as a percentage.
Enter the number of years you plan to hold the investment.
Read the ending balance after fees and the no-fee balance.
Compare the fee drag with the difference in services, risk, and strategy between funds.
Try the same inputs with a lower expense ratio to see the long-term difference.

Formula

Ending balance = P x ((1 + r) x (1 - e))^n. No-fee balance = P x (1 + r)^n. Fee drag = no-fee balance - ending balance. First-year fee = P x (1 + r) x e.

P: Initial investment.
r: Annual return before fees, as a decimal.
e: Expense ratio, as a decimal.
n: Number of years held.
Fee drag: The difference between the no-fee balance and the after-fee balance.

The SEC's example multiplies by the net return factor, (1 + r) x (1 - e), rather than subtracting the expense ratio directly from the return. The two methods give slightly different answers. This page uses the multiplicative method because it matches the published SEC example. The first-year fee is based on the end-of-year balance before the fee, which is why it is P x (1 + r) x e.

Worked example

Example: $10,000 at 5% for 20 years with a 1.5% expense ratio

Defaults: $10,000 invested, 5% gross return, 1.5% expense ratio, 20 years.

Net growth factor: 1.05 x (1 - 0.015) = 1.05 x 0.985 = 1.03425.
Ending balance: $10,000 x 1.03425^20 = $19,611.49.
No-fee balance: $10,000 x 1.05^20 = $26,532.98.
Fee drag: $26,532.98 - $19,611.49 = $6,921.49.
First-year fee: $10,000 x 1.05 x 0.015 = $157.50.
With a 0.5% ratio, the ending balance is $24,002.01 and the drag is $2,530.97.

Reference table

$10,000 at 5% for 20 years at different expense ratios
Expense ratio	Ending balance	Fee drag
0.03%	$26,374.23	$158.74
0.50%	$24,002.01	$2,530.97
1.00%	$21,701.51	$4,831.47
1.50%	$19,611.49	$6,921.49
2.00%	$17,713.63	$8,819.35

Limits

Assumes a constant gross return and a constant expense ratio for the full period.
Uses annual compounding and a single annual fee charge. Actual funds accrue expenses daily.
Ignores sales loads, transaction costs, taxes, advisory fees, and account fees.
Does not predict future returns or account for inflation.
A lower expense ratio does not automatically mean a better fund. Compare strategy, risk, and tracking difference too.

Common mistakes

Subtracting the expense ratio from the gross return instead of multiplying by (1 - expense ratio).
Applying the fee only to the initial investment rather than the growing balance.
Comparing a low-cost index fund with a high-cost fund that holds different assets.
Ignoring taxes and advisory fees that sit outside the expense ratio.
Assuming the expense ratio is the only cost of owning a fund.

Try it yourself

Quick checks. Answers sit tucked under each question.

A $10,000 investment earns 5% for 20 years with a 0.5% expense ratio. What is the ending balance?

Net factor is 1.05 x 0.995 = 1.04475. $10,000 x 1.04475^20 = $24,002.01.

How much does a 1.0% expense ratio cost over 20 years on the same $10,000 at 5%?

The ending balance is $21,701.51, so the fee drag is $26,532.98 - $21,701.51 = $4,831.47.

What is the first-year fee on $50,000 at a 5% return and a 2% expense ratio?

$50,000 x 1.05 x 0.02 = $1,050.

Questions

What is an expense ratio?

It is the annual percentage of a fund's assets used to pay management, administration, and other operating costs. It is deducted from the fund's assets.

Is a lower expense ratio always better?

Not by itself. A low-cost fund can still be a poor fit. Compare the strategy, risk, holdings, and tracking difference as well as the fee.

Does the expense ratio include sales loads?

No. Sales loads, transaction costs, taxes, and advisory fees are separate. The expense ratio covers ongoing fund operating costs.

Why does the calculator use the SEC method?

The SEC's investor bulletin uses the multiplicative method, so this page follows it. That makes the default result match the published example.

Are ETF expense ratios calculated the same way?

The same idea applies, but ETFs may also have brokerage commissions, bid-ask spreads, and premiums or discounts to net asset value.

Does a 1.5% fee really cost that much?

Yes, over long periods the compounding effect is large. The fee reduces the balance every year, so the lost growth compounds too.

Sources

How this page was checked. The formula above was matched against the cited sources, and the worked example was run through the tool on this page before publishing. If you spot an error, contact us so we can fix it and note the correction.