The Tiny ETF Fee That Costs You a Fortune

The Tiny ETF Fee That Costs You a Fortune

Expense ratios sound trivial — 0.03% versus 0.75% — but over a long investing life the difference is anything but small.

How fees compound

A fund skims its fee every year from returns. That lost return never compounds for you. Over decades, the gap between a cheap fund and a pricey one grows wide.

A quick example

Invest $50,000 for 25 years at a 7% return. A 0.03% expense ratio leaves roughly $2,000 more than a 0.75% ratio — about a $30,000 difference, even though the fee gap is under 1% a year.

What to do

Favor broad index ETFs with expense ratios near 0.03–0.10%. Check the ratio each year, since providers sometimes raise fees. Compare like for like; the cheapest fund in the wrong category still loses.

The ETF fee comparison calculator projects the ending value of the same investment at two different fees so you can see exactly what you keep.