Free tools / Fee Impact Calculator
Fund and ETF Fee Calculator (TER)
See how much of your capital management fees eat up over the years and how far they cut your final result.
The model assumes a contribution at the end of each year and a constant rate of return. The TER is charged on total assets every year.
A management fee looks harmless because it is quoted as a fraction of a percent per year. The problem is that it is charged on your entire capital every year and compounds in its own right, only against you.
The calculator sets two scenarios side by side: a portfolio with no fees and a portfolio with an annual fee. After a number of years the gap is usually far wider than intuition suggests, because you lose not just the fee itself but also the return that money would have earned.
Why 1% a year is not 1% in total
A fee charged year after year lowers the base on which subsequent gains accrue. Over a 25-year horizon with a return of around 7% a year, a 1% fee can take roughly a fifth of your final capital, even though in any single year it looks harmless.
That is exactly why the difference between a fund charging 1.8% and an ETF charging 0.2% is one of the few things in investing you can control in advance and with almost certain effect.
What the TER does not cover
The total expense ratio excludes the fund's own transaction costs, the spread you pay when buying, and your broker's commission. With frequent small purchases, the minimum commission can cost more than the annual management fee.
A separate item is the difference in withholding tax on dividends, which depends on the fund's country of domicile. With Irish-domiciled accumulating funds this usually works out better than with equivalents from other jurisdictions.
Frequently asked questions
What is the TER?
The TER, or total expense ratio, is a fund's annual cost measure expressed as a percentage of assets. You never pay it by separate transfer; it is taken continuously out of the fund's assets and shows up only as a slightly lower unit price.
Does a low TER always win?
For passive funds tracking the same index, cost is the main factor separating one result from another, so the lower TER usually wins. It is still worth checking tracking error and liquidity, because a wide spread on an illiquid fund can wipe out whatever you saved on the fee.
How do I compare an active fund with an ETF?
Work out by how much an active fund has to beat the index each year just to make up the difference in fees. If the gap is 1.5 percentage points, the manager has to claw it back every year, and net of costs at that, which historically only a minority of funds manage over the long run.
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