Selurio · Blog
What Do ETF Fees Cost You Over 30 Years? A Shocking Tally
When you choose an ETF or a mutual fund, one number often stays in the background: TER — the fund's annual fee. It looks trivial. The difference between 0.2% and 1% sounds like a rounding error. But it is precisely this number, multiplied by the years and by compounding, that determines how much of the return reaches you and how much stays with the fund.
This article explains what TER is, why the small number makes a big hole, and how to run your own numbers — without telling you which particular fund to choose.
What TER is
TER (Total Expense Ratio) is the percentage the fund withholds every year for management, administration, and expenses. You do not pay it with a separate invoice — it is deducted automatically from the value of your units. That is why it is easy to underestimate: you never see a bill, the money simply never appears.
A sense of the order of magnitude:
- Passive index ETFs — usually between 0.05% and 0.30%.
- Actively managed funds — often 0.75% to over 1.5%.
The difference is under one percent a year. It looks harmless. It is not.
The small number, the big bill
Take a realistic example: you start with €10,000, add €2,400 a year (€200 a month), and assume an average return of 7% a year for 30 years. With no fee at all, your portfolio would reach about €302,828.
Now let us add the fee:
| Fee (TER) | Value after 30 years | Lost return |
|---|---|---|
| 0.2% (index) | €289,847 | €12,982 (4.3%) |
| 1.0% (active) | €243,726 | €59,102 (19.5%) |
With a 1% fee you lose about €59,102 — almost one fifth of the final value. And the difference between choosing a fund with 1% and one with 0.2% is about €46,121. That is what a seemingly insignificant number costs, stretched over 30 years.
Try it with your own numbers in the ETF fees calculator — the example above is preloaded. Change the fee from 1% to 0.2% and watch the final value jump.
Why you lose more than you pay
Here is the most underestimated part. In the example with a 1% fee, the fees actually paid over 30 years come to about €29,182. But the lost return is €59,102 — more than double that.
Where does the difference come from? Every euro the fund withholds as a fee is a euro that no longer grows for you. You lose not just the fee itself, but all the compounding it would have earned over the remaining years. The earlier the fee is taken, the more future growth it carries away with it.
That is exactly why fees are treacherous: the bill you see is only the tip, while the real cost is the missed compounding underneath.
Time amplifies the damage
Since the effect is on compounding, the horizon matters enormously. The same 1% fee, with the same contributions:
| Horizon | Lost return |
|---|---|
| 10 years | €3,510 (6.6%) |
| 20 years | €17,812 (13.0%) |
| 30 years | €59,102 (19.5%) |
Over 10 years the fee eats about 6.6%. Over 30 — almost 20%. The longer your investment horizon (and for retirement saving it is long), the more expensive every tenth of a percent becomes.
What this means in practice
The takeaway is not "avoid all fees at any cost" — sometimes a fund justifies a higher fee. The takeaway is that the fee deserves to be a conscious decision, not a detail you skip past.
A few pointers, none of them advice about a particular product:
- Look at the TER before you choose a fund. It is publicly disclosed in the key information document.
- Compare comparable funds. Two ETFs on the same index can have noticeably different fees.
- Calculate the effect for your horizon, not in the abstract. The same fee weighs differently over 5 and over 30 years.
For more on ETFs themselves as an asset class — and why low fees are one of the reasons for their popularity — see Stocks, ETFs, and cryptocurrencies.
Assumptions
- Constant return. Real markets move in a jagged line; the calculator assumes an average annual figure.
- The fee is charged annually on the full value of the portfolio.
- No taxes or inflation in the calculation — the goal is to isolate the effect of the fee alone.
- The numbers are hypothetical and not a recommendation for a particular fund or investment.
Continue reading
- Compound interest — the eighth wonder of the world — the same compounding the fees take from you also works for you.
- Stocks, ETFs, and cryptocurrencies — what an ETF actually is.
- DCA: why regular investing beats timing — how to invest regularly into the fund you have chosen.
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