See exactly how much fund expense ratios cost you over time in real dollar terms.
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Fee drag = FV(gross return - low fee)^years - FV(gross return - high fee)^years. The entire missing portfolio is what high fees cost you — compounded over decades.
A 1% expense ratio on $100K growing at 7% for 30 years costs you $278K vs 0.03% ratio. Small annual fees compound into massive long-term losses.
Excellent: 0.03-0.10% (Vanguard, Schwab, Fidelity index funds). Acceptable: 0.10-0.25%. Expensive: 0.50%+. Avoid: 1%+ management fee.
Rarely. 80-90% of active managers underperform their index benchmark over 10+ years. The fee difference erodes any potential outperformance.
Expense ratio is annual management fee (charged daily). Transaction costs include bid-ask spread when trading. Both matter but expense ratio has larger long-term impact.
In taxable accounts, check capital gains tax from selling. In retirement accounts (IRA, 401k), switch immediately — no tax consequences.
Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.