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The Daily Capital
INVESTING 101 · Lesson 68

A 1% fee, compounded: what it takes off a 40-year portfolio

Daily Desk · Editorial5 min read
Over 40 years, a 1% annual fee took more out of the account than the investor put in. Not 1% of the money. More than every dollar contributed.

One percent sounds like a rounding error, but run it properly and it is not. Take $500 a month for 40 years — $240,000 of contributions. At a 7% net return you end with about $1,312,000; at 6% net, because a 1% fee came off the top, you end with about $996,000. The gap is roughly $317,000.

Educational, not financial advice.