How small investment fees can add up

Fees reduce what remains invested

A fee of 0.2% might not sound like much. But investment fees are usually charged again and again while you hold a fund. Looking at the amount in dollars, not just the percentage, helps you see what you’re paying.

Over time, the money paid in fees is also money that is no longer available for any future growth. That is why comparing like-for-like costs can be useful.

A simple illustration

Suppose two hypothetical investments had the same market performance but different annual fees. Holding all other assumptions equal, the higher-fee scenario finishes with less money. Real products rarely have perfectly equal risk, features or results, so a calculator is a way to understand the mechanics rather than predict an outcome.

Experiment with our fee impact calculator and change the assumed annual rates and investment period.

Understand what a quoted fee includes

Management fees, transaction costs, brokerage, spreads and taxes are not the same thing. A platform might display only some of them on its main pricing page. Compare the relevant PDS and fee schedule, especially when a product is actively managed or uses a complex structure.

Low cost is not the only criterion

The cheapest option is not necessarily the best fit for a particular need. Investment exposure, liquidity, transparency, operational risk and access may matter. Start by defining what you are trying to learn, then compare the full facts.

Different comparisons answer different questions

Comparing two fee percentages can show fee drag under identical market assumptions. Comparing two real products is harder because their exposures, risk, tax treatment and features may differ. A lower stated management fee may also coexist with other trading or currency-related costs.

Try to isolate one question at a time: what is the management fee, what other expenses may apply, and how similar are the actual products being compared?

Read the fine print on the fee basis

A fee presented as a percentage of assets is different from a fixed fee per transaction. Fee discounts, tiers, conditions and minimum amounts can also change the outcome for smaller balances. Historical return figures may or may not be presented net of particular charges.

Keep the formula and assumptions visible when you calculate an effect. A number without a clear explanation can create false precision, especially across long time periods.

Compare a fee in dollars as well as percentages

On a hypothetical A$20,000 portfolio, a 0.20% annual fund fee is roughly A$40 in the first year and a 0.60% fee roughly A$120, assuming a constant balance and ignoring other costs. The difference is A$80 for that year. Over many years, fees also affect the amount left to grow, although returns will be uneven.

Use our fee impact calculator to try other figures. Compare funds with similar aims and risk, rather than assuming the lowest fee makes any investment suitable.