Fund Expense Drag CalculatorFree online financial calculator — instant results, no sign-up
Model a constant annual expense ratio as a subtraction from annual gross return.
Estimates only, based on the inputs and assumptions shown. This is not financial, investment, tax, or legal advice. Prices, rates and local rules may change; crypto scenarios do not predict returns. Confirm important decisions with a qualified professional.
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About the Fund Expense Drag Calculator
The Fund Expense Drag Calculator compares the growth of an investment with and without a constant annual expense ratio. It subtracts the expense ratio from the gross annual return, then compounds both scenarios over the holding period to estimate the fee drag at the horizon.
- Starting investment ($)
- The initial amount invested in dollars, with a default of $50,000.
- Gross annual return (%)
- The assumed annual investment return before expenses, expressed as a percentage, with a default of 7%.
- Annual expense ratio (%)
- The annual fund expense percentage subtracted from the gross annual return, with a default of 0.75%.
- Holding period (years)
- The length of time the starting investment remains invested, measured in years, with a default of 20 years.
Formula and method
r = R / 100; e = E / 100; V₀ = P × (1 + r)^t; Vₑ = P × (1 + r − e)^t; D = V₀ − Vₑ.
- PStarting investment in dollars.
- RGross annual return entered as a percentage.
- EAnnual expense ratio entered as a percentage.
- rGross annual return converted to a decimal.
- eAnnual expense ratio converted to a decimal.
- tHolding period in years.
- V₀Projected ending value without the annual expense ratio, in dollars.
- VₑProjected ending value after subtracting the annual expense ratio from the gross return, in dollars.
- DFee drag at the horizon: the difference between the two projected ending values, in dollars.
Convert the return and expense percentages to decimals. Compound the starting investment at the gross annual return for the no-fee scenario and at the gross annual return minus the expense ratio for the fee scenario. Subtract the fee-scenario ending value from the no-fee ending value, rounding displayed dollar amounts to cents. With the defaults, the modeled net annual return is 7% − 0.75% = 6.25%: $50,000 × (1.07)^20 gives $193,484.22 without the annual fee, and $50,000 × (1.0625)^20 gives $168,092.67 with the annual fee. The fee drag at the horizon is $25,391.55.
Worked example
These are the calculator's starting values and the results it actually produces for them.
Inputs
- Starting investment50000 $
- Gross annual return7 %
- Annual expense ratio0.75 %
- Holding period20 years
Results
- Without annual fee$193,484.22
- With annual fee$168,092.67
- Fee drag at horizon$25,391.55
How to use the Fund Expense Drag Calculator
- 1Enter the starting investment in dollars; the default is $50,000.
- 2Enter the gross annual return before fund expenses; the default is 7%.
- 3Enter the annual expense ratio; the default is 0.75%, entered as 0.75 rather than 0.0075.
- 4Set the holding period in years; the default is 20.
- 5Compare the ending values with and without the annual fee, then review the fee drag at the horizon.
Reading your result
“Without annual fee” is the projected ending balance if the investment earns the full gross return each year: $193,484.22 with the defaults. “With annual fee” is the projected ending balance using the gross return minus the expense ratio: $168,092.67. “Fee drag at horizon” is the resulting reduction in ending wealth: $25,391.55. This difference includes both the effect of expenses and the growth those deducted amounts could otherwise have earned; it is not simply a total of fees charged.
Limitations
This is a simplified annual-compounding model, not a forecast or a reconstruction of a fund’s actual fee deductions. It assumes a constant gross return and expense ratio, no additional contributions or withdrawals, and no separate taxes, inflation adjustment, trading costs, sales loads, or advisory fees. Actual fund expenses are generally accrued within the fund rather than deducted once annually as modeled here. Published fund returns may already reflect operating expenses, so using them as gross returns can double-count the expense ratio. Extreme inputs that produce a negative annual growth factor do not represent a meaningful conventional fund projection.
Common questions
Does a 0.75% expense ratio reduce a 7% gross return to 6.25%?+
Yes, in this calculator. It subtracts 0.75 percentage points from 7%, giving a modeled annual net return of 6.25%; it does not reduce the return by 0.75% of 7%.
Is the $25,391.55 fee drag the total amount paid directly in fees?+
No. It is the difference between the projected ending balances of $193,484.22 and $168,092.67. It includes the lost compounded growth associated with expenses as well as their direct effect.
Should I enter a fund’s published annualized return as the gross annual return?+
Check how that return is reported first. Fund performance figures often already reflect operating expenses; subtracting the expense ratio again would double-count those costs. This calculator expects a return assumption before the modeled expense ratio.
Does this calculator deduct the entire holding period’s expenses at the end?+
No. It lowers the return used for every year of compounding. With the defaults, the investment compounds at 6.25% for 20 years in the fee scenario, rather than compounding at 7% and taking a single fee deduction at the end.
Does the calculator save my information?+
Calculations run in your browser. While signed in, inputs and results are automatically recorded in account history; saving a result creates a separate saved record.
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Results are estimates for informational purposes and are not financial, medical or legal advice.