Calculate mutual fund expense ratio impact
An expense ratio represents the annual fee charged by a mutual fund or ETF to cover its management, administration, marketing, and operational costs. It is calculated as a percentage of the fund's total assets under management.
A high expense ratio reduces your overall investment returns over time. Since the fee is deducted daily from the fund's net asset value (NAV), even a small difference of 1% in the expense ratio can result in tens of thousands of dollars in lost returns over a 20-30 year period due to compounding.
For passive index funds and ETFs, a good expense ratio is typically below 0.20%. For actively managed mutual funds, a reasonable expense ratio ranges between 0.50% and 1.25%. Anything above 1.50% is generally considered expensive.
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