Compare the 20-year end value of two portfolios with different annual fees.

100,000 at 7% gross return over 20 years ends at 386,968 with no fees. At 0.2% fees, end value is 372,756. At 1.5% fees, end value drops to 293,869 — roughly a 81,000 gap versus the low-cost option, for the same underlying return. Fees don't affect gross return; they eat into compounded final value. Big difference.

What the result means

Primary is the cost of the higher fee — the gap in end value between the two scenarios. Secondary shows each end value and the fee spread in percentage points. Over 20 years the compound effect is always larger than the percentage spread suggests.

Real-world implication

This is the core argument for index investing over active management: most active funds don't consistently beat their benchmark net of fees, and the fee drag compounds ruthlessly. The compound gap over a full career of investing can be a meaningful share of final retirement wealth.

A worked example

Try the defaults: starting balance of 100,000, gross annual return of 7%, low fee of 0.2%, high fee of 1.5%. The tool returns 80,980.60. You can adjust any input and the result updates as you type — no submit button, no reload. That's the real power here: seeing how sensitive the output is to one or two assumptions.

What moves the number most

The result responds to Starting Balance, Gross Annual Return, Low Fee, High Fee, and Years. Two inputs usually tip the answer one way or the other. Identify which ones matter most by flipping each value past a round threshold and watching whether the winning option changes.

The formula behind this

Net return in each scenario is gross minus fee. Both compound annually from the same starting balance over the same horizon. The gap between end values is the extra cost imposed by the higher fee, compounded across time. Everything the calculator does is shown in the formula box below, so you can check the math against your own spreadsheet if you want.

Why investors run this

Most people's intuition for compounding is wrong — not because the math is hard, but because linear thinking doesn't account for curves. Running numbers through a calculator like this one is the cheapest way to recalibrate that intuition before making an irreversible decision about contribution rate, asset mix, or retirement age.

What this doesn't capture

Steady-rate math ignores real-world volatility. Actual returns are lumpy; sequence-of-returns risk matters most in drawdown; fees and taxes drag on compound growth; and behaviour changes in drawdowns can reduce outcomes below the projection. Treat the number as one scenario, not a forecast.