How Expense Ratios Affect Long-Term Growth
A fund expense ratio describes annual operating expenses as a percentage of fund assets. Even a small recurring fee reduces the amount left to compound. Published fund returns generally already reflect operating expenses, so do not subtract them twice.
Hypothetical example
Hypothetical: start with $10,000, no further contributions, a steady 6% gross nominal annual return and monthly compounding for 30 years. Subtracting an annual 0.25% fee through monthly deductions gives about $55,900; a 1% fee gives about $44,700. Taxes, inflation and other costs are excluded.
Key takeaways
- Compare identical starting balances, contributions and time horizons.
- Distinguish money paid directly in fees from foregone growth.
- Returns are uncertain; the illustration is not a forecast.
Source & context
www.investor.gov — financial education referenceExamples are Sprinvo illustrations, not historical performance or guaranteed outcomes. Education only.