Transaction costs drag from portfolio turnover.

100,000 portfolio, 50% annual turnover, 0.2% commission + 0.1% spread round-trip: 150/year cost. 100% turnover doubles to 300. Active managers averaging 100%+ turnover face 0.5-1%+ drag before fees — significant on real-return basis.

Quick example

With portfolio value of 100,000 and annual turnover of 50% (plus commission per trade of 0.2% and bid-ask spread of 0.1%), the result is 250.00. Change any figure and watch the output shift — it's often more useful to see the pattern than to memorise the formula.

Which inputs matter most

You enter Portfolio Value, Annual Turnover, Commission per Trade, and Bid-Ask Spread. The rate and the time horizon usually dominate — compounding means a small change in either reshapes the final figure more than a similar shift in contribution size. Test this by doubling one input at a time.

What's happening under the hood

Round-trip cost × turnover. The formula is listed in full below. If the number looks off, you can retrace the calculation by hand — that's the point of showing the working.

Where this fits in planning

This is a "what-if" tool, not a forecast. Use it to test ideas before committing: what happens if the rate is 2% lower than hoped, what happens if you add five more years. The value is in the scenarios you run, not the single answer you get from the defaults.

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.

Where to go next

This calculation rarely sits alone in a planning exercise. If you're running these numbers, you'll probably also want the index fund vs active fund cost, the investment fee drag calculator, and the portfolio rebalancing frequency calculator — each one answers a different question in the same territory. Treating them as a set rather than in isolation usually produces a more honest picture.