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Two identical $100,000 investments end about $180,000 apart because of one fee

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Correction, Sept 29, 2026: Clarification: the 7% on slide 4 is an assumption, not a promise. For reference, US stocks (S&P 500, dividends included) compounded about 6.8% a year after inflation from 1928 to 2025, with 30-year stretches ranging from about 4.3% to 10.1% and losing years along the way. Because the rate is after inflation, every balance in the post, including slide 5's $574,000, is in today's dollars. The arithmetic on the slides is unchanged.
Two identical $100,000 investments end about $180,000 apart because of one fee
Same size on paper. An expense ratio is the yearly fee a fund charges automatically, before you ever see a statement. A managed fund pays people to pick investments for you; an index fund follows the market. On paper, 0.03% and 1% look similar — both tiny-looking percentages, easy to skip past.

Same size on paper

An expense ratio is the yearly fee a fund charges automatically, before you ever see a statement. A managed fund pays people to pick investments for you; an index fund follows the market. On paper, 0.03% and 1% look similar — both tiny-looking percentages, easy to skip past.

Number 1: this year's cost. The fee is a yearly percentage of your whole balance, deducted from the fund's assets a little each day, so you never see it as a withdrawal. On $100,000 this year: a 0.03% fund costs about $30. A 1% fund costs $1,000, over 30 times as much.

Number 1: this year's cost

The fee is a yearly percentage of your whole balance, deducted from the fund's assets a little each day, so you never see it as a withdrawal. On $100,000 this year: a 0.03% fund costs about $30. A 1% fund costs $1,000, over 30 times as much.

Number 2: thirty years later. Fees compound too — they take a share of your growth every year. Assume 7% a year, the market's long-run average after inflation (real returns swing and some years are negative), no new deposits: $100,000 at a 0.03% fee grows to about $755,000 in today's dollars after 3

Number 2: thirty years later

Fees compound too — they take a share of your growth every year. Assume 7% a year, the market's long-run average after inflation (real returns swing and some years are negative), no new deposits: $100,000 at a 0.03% fee grows to about $755,000 in today's dollars after 30 years.

Number 3: the actual gap. Same $100,000, same assumed 7% a year — only the fee changes. With a 1% expense ratio, the balance grows to about $574,000 after 30 years, about $180,000 less than the 0.03% fund (expense ratio only; taxes and other costs ignored).

Number 3: the actual gap

Same $100,000, same assumed 7% a year — only the fee changes. With a 1% expense ratio, the balance grows to about $574,000 after 30 years, about $180,000 less than the 0.03% fund (expense ratio only; taxes and other costs ignored).

Where to check the fee. Every mutual fund and ETF must show its expense ratio in the prospectus fee table; most fact sheets list it too. Search your fund's ticker plus 'expense ratio,' or check your 401(k) dashboard. It's one of the few costs you can know in advance, though funds can change it.

Where to check the fee

Every mutual fund and ETF must show its expense ratio in the prospectus fee table; most fact sheets list it too. Search your fund's ticker plus 'expense ratio,' or check your 401(k) dashboard. It's one of the few costs you can know in advance, though funds can change it.

Sources and assumptions

Assumptions:

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