Calculator
Investment Fee Drag Calculator
The result is the difference between two compounding paths, not just annual fee dollars multiplied by years.
An annual fee reduces the balance that remains available to compound every following year. Enter starting capital, gross return, annual fee, and horizon to compare gross and net ending values and quantify the cumulative fee drag.
How this investment fee drag calculator works
The calculator compounds one portfolio at the gross return and another at gross return minus the annual fee. Their ending-value difference is the modeled cumulative drag.
Formula
Fee drag = principal × (1 + gross return)ʸᵉᵃʳˢ − principal × (1 + gross return − fee)ʸᵉᵃʳˢ
Real fees can include fixed charges, performance fees, spreads, taxes, and changing expense ratios. Returns also vary through time.
Primary specifications
Before you use the result
Assumptions
- • Gross return and fee remain constant.
- • Fees are represented as an annual percentage of assets.
- • Taxes, contributions, withdrawals, and trading costs are excluded.
Quick start
- 1. Enter the all-in recurring asset-based fee.
- 2. Use the same gross-return assumption for both cases.
- 3. Compare the cost with the value and services the fee is meant to provide.
Frequently asked questions
Why is fee drag larger than fees paid?
Money removed for fees also loses all future compounding it could have earned.
Should I include adviser and fund fees?
For an all-in scenario, combine recurring asset-based costs while avoiding double-counting.
Does a higher fee always mean worse value?
Not automatically. The relevant question is whether the service provides value after its full cost and risk.
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