I have calculated how much fee you are paying in dollar amount for 30 years. The calculation based on $10,000 investment made with 7% yearly return for next 30 years. The 0.05% expense ratio which is usually associated with passively managed fund like ETF will earn you $74989 (after deducting $1134 fees) after 30 years. If fund charges you 2% fee yearly and earn 7% return for next 30 years, the return reduced to $41545.
| Fees % | Fees Paid by You | Return After Deducting Fees |
|---|---|---|
| 0.05% | $1134 | $74989 |
| 0.25% | $5506 | $70616 |
| 0.50% | $10628 | $65495 |
| 0.75% | $15389 | $60734 |
| 1.00% | $19815 | $56308 |
| 1.25% | $23928 | $52195 |
| 1.50% | $27750 | $48373 |
| 1.75% | $31303 | $44822 |
| 2.00% | $34599 | $41524 |
All group members please remember when you select mutual fund look the expense ratio. The fund that charges 2% expense ratio would have same return if index finish 20% per year and fund end up 22%. The fund manager will keep saying we beat index by 2% but in nut shell you got exactly same return the index produced since expense ratio of index fund is very minimal - in above case 0.03%. For me and my wife 401K, I have invested 100% in SPY ETF with expense ratio around 0.04%. Please check your 401K investment allocation.
Join Discussion Group
Join Trade Group