No Investment Fee Is Small, Long Term
2021
This note presents a simple "back of the envelope" formula estimating that an annual investment fee expense ${\epsilon}$%, compounding for $N$ years, consumes almost $N$${\epsilon}$% of an investment's value. For example, an investment with 1% annual fee compounding for 30 years pays almost 30% of its final value to fees over this period. This approximation captures how annual fees can compound over a decade or more to cumulative costs an order of magnitude higher. The formula is simple enough for rapid hand calculation.
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