About this calculator
Index funds track a market benchmark (S&P 500, Total US Market, MSCI World) and charge a small annual expense ratio (ER) for the privilege. This calculator projects an index-fund position over time, factoring in the ER drag — which seems tiny per year but compounds into meaningful sums over a multi-decade horizon.
How expense ratios eat returns
A 1% ER doesn't sound bad until you compound it. Over 30 years at a 10% gross return, a 1% ER reduces the effective return to 9% — and the difference between $100,000 growing at 10% vs 9% for 30 years is $446k. Vanguard's pioneering research (and Jack Bogle's career) was largely about making this drag explicit.
Current ER landscape (2024)
- VTI / SCHB / ITOT (total US market) — 0.03–0.04%
- VOO / SPY / IVV (S&P 500) — 0.03–0.10%
- VT (total world) — 0.07%
- Average actively-managed fund — 0.5–1.0%
- Legacy retirement plan funds — sometimes 0.5–1.5%
When an expensive fund makes sense
Almost never for passive exposure. If you want US large-cap, the 0.03% ER index is mathematically identical to the 0.50% ER actively-managed S&P 500 fund — minus the fee. For factor exposure (small-cap value, momentum, etc.), some active management may add value net-of-fees, but the bar is high. SPIVA reports consistently show 80%+ of active funds underperform their benchmark over 10 years.