ETF Expense Ratio Race
Watch five funds race side by side and see exactly how much fees cost you over 30 years of compounding.
Every basis point you pay in fund fees is a basis point that never compounds for you. Over a single year the difference between a 0.03% index fund and a 2.25% loaded fund seems trivial, but over three decades the gap can grow to tens of thousands of dollars on even a modest starting balance. This interactive race visualises that compounding drag so you can see — not just read about — why low-cost investing matters.
Hit Start Race below and watch the bars grow year by year. Adjust the starting amount or annual return to match your own situation, then compare the final totals to see exactly how much expensive fees could cost you.
Year
0
Index Fund (VOO)
0.03% ER
Low-Cost Active
0.20% ER
Average Active
0.75% ER
Expensive Active
1.50% ER
Loaded Fund
2.25% ER
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Frequently Asked Questions
What is an expense ratio and why does it matter?
An expense ratio is the annual fee a fund charges as a percentage of your investment. A 0.50% expense ratio means you pay $50 per year for every $10,000 invested. Over decades, even small differences compound dramatically — a gap of just 0.72% per year can cost you tens of thousands of dollars on a $10,000 investment over 30 years.
How does this expense ratio race calculator work?
The tool simulates five portfolios that all start with the same balance and earn the same gross return (8% by default). The only difference is the expense ratio each fund charges. Each year, the net return is calculated as the gross return minus the expense ratio. Over 30 years you can watch the compounding effect of fees pull the expensive funds further and further behind.
Are the expense ratios in this tool realistic?
Yes. The five racers represent real tiers of fund costs: broad index funds like VOO charge around 0.03%, low-cost active funds charge about 0.20%, the asset-weighted average US equity fund charges roughly 0.75%, expensive actively managed funds charge around 1.50%, and some funds with sales loads and high management fees can total 2.25% or more per year.
Does a lower expense ratio guarantee better performance?
A lower expense ratio does not guarantee better gross returns, but it does guarantee you keep more of whatever the market delivers. Research consistently shows that over long periods, the majority of actively managed funds underperform their benchmark index after fees. Since you cannot predict which active funds will outperform, minimising fees is one of the most reliable ways to maximise long-term wealth.
What annual return should I use in the calculator?
The default 8% represents a rough historical average for a diversified stock portfolio before inflation. If you want a more conservative estimate, try 6-7%. For a bond-heavy portfolio, 4-5% may be more appropriate. The key takeaway — that fees compound and create large gaps — holds true regardless of the return assumption.