Learn the stock market › Funds, ETFs and bonds › Lesson 6 of 7

What fees cost over 30 years

Short answerA fund returns what its holdings return, minus the fee. The S&P 500 with dividends returned 11.3% a year since 1988, so a fund that followed it got that minus its fee. The fee is taken every year, also from earlier years' gains, so over 30 years a 1.5% fee takes 36% of what you would otherwise have had, and 0.2% takes 6%.

The fee takes a part of every year

A fund's fee, its expense ratio, is a percentage per year. It is taken from the fund's value a little at a time, so you never pay it yourself and it is on no statement. Because it comes out of everything the fund is worth, including what it earned in earlier years, it grows over time. The SEC puts it plainly: if two funds' holdings perform identically, the one with the lower cost generally returns more to you.

Here is $10,000 growing 7% a year before fees, for 30 years, at different fees. 7% is only an example for the comparison; what the market has actually returned, and how much it has varied, is in the study of the stock market's average return.

Fee per year	After 30 years	The fee cost	Of what you could have had
0.2%	$71,685	$4,437	6%
0.5%	$65,495	$10,628	14%
1.0%	$56,308	$19,815	26%
1.5%	$48,373	$27,750	36%
2.0%	$41,524	$34,599	45%

Without any fee it would have become $76,123. At 0.2% it became $71,685 and at 1.5% $48,373. The gap between those two is $23,313, on the very same holdings. A percentage point sounds small in a single year but becomes a large part of the total after thirty.

Try your own fund

The expense ratio is in the fund's prospectus fee table. Enter it, and change the amount, the monthly saving and the years if you like.

Amount today, $Each month, $YearsReturn per year before fees, percentFee per year, percent

Enter your fund's expense ratio.

The calculator uses the same return with and without the fee, so the difference shows only what the fee costs. What monthly saving would have become on real prices is in the dollar-cost averaging calculator.

What the fee leaves out

A fund's own trading costs are not always in its expense ratio, and some funds charge a sales load when you buy or sell. An ETF adds the spread and any commission. And a fund with a higher fee may have returned more if it picked better companies. The fee is the one thing you know in advance.

Test yourself

Two funds own exactly the same stocks. One charges 0.3% a year, the other 1.8%. What happens after 30 years?

Source

US Securities and Exchange Commission, Investor Bulletin: Index Funds and Mutual Fund and ETF Fees and Expenses, read on 5 November 2026.