Index Fund Expense Ratio Impact Calculator

Because the expense ratio is subtracted every single year before compounding, not just once — a fund charging 0.77 percentage points more each year effectively grows at a lower compounded rate for the entire holding period, and that gap compounds on itself the same way returns do. Over two or three decades, even a fraction of a percentage point in annual fees can consume tens of thousands of dollars from a substantial portfolio.

No — both funds are modeled with the exact same Expected Gross Return before fees, so any difference in final value comes purely from the expense ratio, not from an assumption that the more expensive fund manages money less skillfully. This isolates the fee's effect specifically, which is useful precisely because gross performance is uncertain and hard to predict, while the fee is a known, guaranteed drag every year regardless of how the fund performs.

It's the cost of higher fees expressed as a percentage of the low-cost fund's total investment gain (final value minus the original investment), rather than as a percentage of the investment amount itself. This framing tends to produce a strikingly high percentage over long horizons, since fees compound against a growing base while gains are what's left after that compounding drag is subtracted.

Yes — expense ratios in that range are realistic for large, low-cost, broadly diversified index funds tracking major market indexes, and several exist in the US market at or near that level. The 0.80% default for the high-cost comparison is more representative of an actively managed mutual fund; adjust both figures to match the actual funds you're comparing for a precise result.