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# What a 1% fee really costs
- URL: https://ledger.ghost-themes.apps.codememory.com/what-a-1-fee-really-costs/
- Published: 2026-09-02T12:30:00.000Z
- Updated: 2026-09-02T12:30:00.000Z
- Description: Chart of the week: on $10,000 over thirty years, the gap between a cheap fund and an expensive one is bigger than the deposit.
- Author: Priya Raman
- Tags: Markets, #chart, #Import 2026-09-30 06:03

A fee of 1% a year sounds tiny. It is the kind of number that appears in small print and passes without a second thought. This week's chart shows why it deserves much more attention: over thirty years, the difference between a low-cost fund and an expensive one can be several thousand dollars on even a modest investment.

## What the chart shows

The chart follows a single investment of $10,000 left alone for thirty years, growing at 6% a year before costs. The three lines show what happens with a yearly fee of 0.1%, 0.5% and 1%.

With a 0.1% fee, the investment grows to about $56,000\. With a 1% fee, it grows to about $43,000\. The expensive fund has quietly taken around $13,000, more than the original investment, just in the difference in fees.

> Returns are uncertain. Fees are guaranteed. That is why fees deserve more attention than they get.  
>  
> **Priya Raman**

## Why small numbers grow so large

Fees are charged as a percentage of your whole balance, every year. As your savings grow, the fee grows with them. And every dollar taken in fees is a dollar that can no longer grow for you in the years that follow. In other words, fees compound in exactly the same way that returns do, only against you.

This is why the gap between the lines on the chart is small at first and very large at the end. In the first five years, the difference is a few hundred dollars. In the last five years, it is thousands.

🧮

A rough rule of thumb: over thirty years, every 1% of yearly fees takes roughly a quarter of your final savings. Over forty years, closer to a third.

## Where fees hide

Fund fees are not the only costs. A typical investor might pay several layers without noticing.

| Cost          | Typical range | Charged    |
| ------------- | ------------- | ---------- |
| Fund fee      | 0.05% – 1.5%  | Every year |
| Platform fee  | 0% – 0.45%    | Every year |
| Adviser fee   | 0% – 1%       | Every year |
| Trading costs | Varies        | Each trade |

Added together, an investor using an adviser, a platform and an actively managed fund can easily pay 2% or more each year. Over a lifetime of saving, that is a very large amount of money.

![Adding up every layer of fees takes ten minutes and can save thousands.](https://ledger.ghost-themes.apps.codememory.com/content/images/2026/09/fee-calculator.jpg)

Adding up every layer of fees takes ten minutes and can save thousands.

## Are expensive funds ever worth it?

Sometimes. Good advice can be worth far more than it costs, especially if it stops you from making expensive mistakes, like selling everything in a panic when markets fall. And some specialist funds, in markets that are harder to invest in, may justify higher costs.

But the burden of proof should always be on the expensive option. Before paying more, ask what you are getting for it, and whether it has actually delivered after costs in the past.

## What to do this week

Find your latest statement for each pension or investment account and look for three numbers: the fund's ongoing charge, the platform or account fee and any adviser fee. Add them together. If the total is above 1% a year, it is worth asking whether a cheaper option would do the same job. It is one of the few decisions in investing where the benefit is almost certain.

## How to compare two funds fairly

When comparing funds, look at the total yearly cost, but also check that you are comparing similar things. A global index fund and a fund investing in small companies in one country are not doing the same job, and their costs will differ for good reasons.

For two funds that follow the same index, the comparison is simple: the cheaper one will almost always leave you with more, because they own the same companies. For actively managed funds, look at performance over at least ten years after fees, compared with a suitable index. Many will have trailed it. The few that beat it may not do so again, but at least you will know what you are paying for.

### Switching costs

Before switching to a cheaper fund, check for exit fees, and whether moving money between accounts could trigger tax. In most cases, the long-term saving from lower fees is far larger than any one-off cost, but it is worth doing the sums first.

## The bottom line

You cannot control what markets do. You can control what you pay. A few minutes spent checking fees may be the most valuable investment research you ever do.