Investment Fees: Expense Ratios, Advisory Fees, Loads & Their Long-Run Cost

What you'll build

What you will be able to do

Each lab ends with a concrete result that you build yourself and the checker confirms, cell by cell.

• Compute the exact net return after a 1% annual fee, grow $100,000 for ten years with and without the fee, see the fee paid each year and measure the fee drag.
• Grow a savings plan for 30 years with FV before and after a 0.95% all-in cost, express the cost in dollars and find with NPER how many extra years the after-cost plan needs to catch up.
• Compare five fictional funds' expense ratios in dollars per year and after 10 years, and work out how much extra return the active fund must deliver just to match the cheapest index fund.
• Calculate the weighted expense ratio of a four-fund portfolio, add a 1% advisory fee, express the all-in cost in dollars and measure its effect over 20 years.
• Compare a front-load Class A share with a back-load (CDSC) Class B share of the same fictional fund year by year and find the holding period after which the front load pays off.
• Price one investor's usage on three fictional platforms – custody fee with minimum and cap, account fee, commissions and spreads – and find the portfolio size above which a flat-fee platform beats a percentage one.
• Recompute six years of a fictional fund's management and performance fees from the administrator's statement, with a 5% hurdle and a high-water mark, and see what the high-water mark saved in year 4.
• Combine fund, advice and platform fees and front loads for four illustrative investing paths, project 25 years of saving with FV and chart end value versus the amount lost to fees.