Grant Bishop

Tuesday, 10 November 2026 · Markets closed · Edition 20

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Toolkit · Draft, not published

What does a 1 percent yearly fee cost over 30 years?

A yearly fee is taken from a balance that keeps growing, so its cost compounds along with the returns.

A fee quoted as a percent a year looks small next to a year’s returns. The cost is larger than it looks because it is taken every year, from a balance that includes every earlier year’s growth. The fee compounds the same way the returns do.

The arithmetic

Each year the balance grows by the year’s return and then gives up the fee. After one year, $1 becomes $1 times (1 plus the return) times (1 minus the fee). After n years, raise that yearly factor to the power n. Do the same without the fee, and the difference between the two balances is what the fee cost.

Worked example

Start with $10,000 and assume a steady 6 percent a year, for the arithmetic only. With no fee, the balance after 10 years is about $17,908; after 20, about $32,071; after 30, about $57,435.

With a 1 percent yearly fee taken from the same returns, the balance is about $16,196 after 10 years, about $26,231 after 20 and about $42,485 after 30.

The fee cost about $1,712 by year 10, about $5,840 by year 20 and about $14,950 by year 30. Measured against what the balance would have been, that is about 10 percent of the no-fee balance at 10 years, 18 percent at 20 and 26 percent at 30. The fee rate never changed; the share of the outcome it took kept rising.

Balance with no fee —
Balance after the fee —
What the fee cost —
As a share of the no-fee balance —

The math: each year times (1 plus the return) times (1 minus the fee). The return is an assumption you enter, not a forecast. Nothing you enter is stored or sent. This is arithmetic, not a recommendation.

Reading a real fee

Fees come in several layers: a fund’s expense ratio, an adviser’s or platform’s fee, trading costs, and taxes on turnover. Each is a yearly drag of its own, and they add. The calculator takes the total; a reader can enter each layer separately to see what it does alone.

Real returns are not steady. The arithmetic here uses a fixed rate so the fee’s effect can be seen apart from the market’s; in a real account the order of good and bad years changes the ending balance, while the fee’s cost keeps the same shape.

This is arithmetic on assumed numbers, not a forecast of any return, and not a judgement of any fee. What a cost pays for is a separate question from what it costs.