Expense Ratio Calculator
Compute the cumulative cost of a fund's expense ratio eroding long-term returns.
Input Data
Results
At a glance:The Expense Ratio (TER) is the fund's annual total expenses as a percent of net asset value (management, admin, custody, etc.), deducted directly from returns. This calculator takes initial investment, annual contribution, expected gross return, expense ratio and years to compute the net return after fees, the future values with/without fees, and the cumulative fee cost. Core: net return = gross return − ER; FV = I₀(1+r)^n + PMT×[(1+r)^n − 1]÷r; cumulative fee cost = gross FV − net FV. It shows how a tiny annual fee erodes returns via compounding.
Formula
Net return = gross return − expense ratio.
FV = I₀(1+r)^n + PMT×[(1+r)^n − 1]÷r (annual compounding).
Cumulative fee cost = gross FV − net FV.
$$$r_{net} = r_{gross} - \\text{ER}$$$$$$FV = I_0(1+r)^n + PMT\\dfrac{(1+r)^n - 1}{r}$$$$$$FV_{gross} - FV_{net}$$$How to Use
- Enter the initial investment and (if any) annual contribution.
- Enter the expected gross annual return and the fund's expense ratio.
- Enter the years, and compare the with-fee vs no-fee future value to quantify the long-term fee cost.
Expense ratio erosion at different rates (gross 6%)
| Initial | Annual contrib. | Expense ratio | Years | Cumulative fee cost |
|---|---|---|---|---|
| HK$100,000 | HK$0 | 0.75% | 10 | HK$12,275 |
| HK$100,000 | HK$0 | 0.20% | 10 | HK$3,350 |
| HK$100,000 | HK$12,000 | 1.50% | 20 | HK$144,512 |
Case Studies
Case 1: How much does 0.75% erode over 10 years?
Invest HK$100,000, gross return 6%, expense ratio 0.75%, 10 years, no extra contribution.
Net return = 6% − 0.75% = 5.25%. No-fee FV = 100,000×(1.06)^10 ≈ HK$179,085; with-fee FV = 100,000×(1.0525)^10 ≈ HK$166,810. Cumulative fee cost = 179,085 − 166,810 ≈ HK$12,275.
Interpretation: only 0.75% a year, seemingly trivial, eats about HK$12,275 over 10 years — over 10% of principal. Because the fee is deducted yearly and compounded, the foregone part would have kept compounding. That is why watch the TER.
Case 2: Low-fee ETF vs high-fee active fund
Compare two funds, both assumed 6% gross. Low-fee ETF: 0.20% fee, 100k/10yr, cumulative cost ~HK$3,350. High-fee active: 1.50% fee, 12k annual contribution, 20 years, cumulative cost ~HK$144,512.
At similar returns, raising the fee from 0.20% to 1.50%, extending 10 to 20 years with contributions, balloons cumulative cost from thousands to over HK$144k.
Interpretation: fee impact amplifies with fee rate, amount and years together — why passive index funds/ETFs sell on low fees, every saved basis point (0.01%) compounds into a large gap. But low fee is not the only factor — also weigh tracking error, liquidity and performance; if returns differ greatly, fee alone is inconclusive. This assumes fixed gross return; real returns vary. Educational estimate only, not advice.
FAQ
What does the expense ratio include?
The expense ratio (TER) usually covers the fund's annual total expenses — management, administration, custody, audit — as a percent of NAV, deducted directly from returns.
Why does a tiny expense ratio matter so much?
The ratio nibbles returns every year and compounds over time. A seemingly 0.75% annual fee can eat a sizable final amount over a decade or more; the longer the period and larger the amount, the wider the gap.
Is a lower expense ratio always better?
With similar returns, a lower ratio keeps more return, so passive index funds/ETFs are known for low fees. But also weigh tracking error, liquidity and overall performance, not fees alone.
Is the TER charged once a year or daily? How do I actually pay it?
Many investors think the TER is like a bank annual fee 'charged once a year, deducted from your account' — it is not. You barely 'see' it deducted, yet it erodes returns daily. How it works: the fund converts annual total expenses into an annualised percent (the TER), then deducts it daily from the fund's Net Asset Value (NAV) in proportion. So the unit price (NAV) you see each day is already net of that day's small expense slice. Example: a 0.75% TER is roughly 0.75% ÷ 365 ≈ 0.00205% deducted daily, compounding to 0.75% a year. You get no 'fee bill' and see no sudden debit — the fee is embedded in the unit price you buy/sell. Two implications: (1) fees are charged on asset size, so the more you invest and the longer you hold, the more you pay in dollars (even if the percent is fixed); (2) because it is invisible, many ignore its long-term power — as this calculator shows, under 1% a year can compound over 10–20 years into 10–20%+ of the final amount. So actively check the TER (fund overview, Key Facts Statement KFS, or the fund site) and estimate its real impact with this calculator; do not ignore it just because you cannot see it.
Is the expense ratio the same as subscription/redemption fees? Other Hong Kong fund costs?
The TER is only part of total cost — it covers ongoing annual operating expenses while holding, but not one-off buy/sell charges or hidden costs not in TER. To see true cost, note: (1) front-end load (subscription fee) on buying, common in active unit trusts, several percent (often discounted/waved on platforms); (2) back-end/redemption fee on selling, sometimes falling with holding period; (3) TER — the ongoing annual NAV deduction this calculator handles, the key long-term cost; (4) transaction costs inside the fund (brokerage, spreads) usually not in TER yet erode returns (high-turnover active funds can be significant); (5) bid-ask spread and premium/discount when trading ETFs; (6) platform/custody fees via broker or bank. For Hong Kong investors, ETFs (HKEX-listed) usually have no subscription/redemption fee but you pay broker commission and watch the spread; unit trusts more often have a subscription fee — compare platforms. Separate one-off (subscription/redemption) from ongoing (TER): one-off matters more for short holds, TER's compounding erosion matters most for long holds. Check the KFS fee table. This calculator focuses on TER's erosion and excludes subscription, redemption and transaction costs, so real total cost is higher; for educational estimation only, not advice.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.