Return On Investment (ROI)

Theory

Return On Investment

When you invest over time, the growth of your capital depends on two key factors: the rate of return and the fees applied to your investment. Given the same return, even a small difference in fees can significantly affect the final value of your investment.

Let's imagine that years ago you started investing in a retirement account with several index funds. At first, fees of less than 1% might seem negligible, but when you analyze the returns over time, you realize how much they can affect your investment.

The purpose of the calculator is to demonstrate how fees eat into your returns. Use the calculator below to see how fees can affect the return on your investment. It shows the same investment with two different levels of fees, highlighting the difference in returns.

Use

1. Enter the initial amount invested: Starting Investment.

2. Specify the annual contribution you add to the investment: Annual Additions.

3. Compare two different fee levels to see the difference in returns by entering them in With Low Fees (%) - With High Fees (%).

4. Enter the expected annual rate of return: Return (%).

5. Set the number of years for the calculation: Years.

You can see a histogram that makes you perceive the difference.

Scroll down to see the returns and fees in detail for each year.

Example:

Let's imagine an initial investment of 20'000 euros and an annual addition of 5'000 euros.

We want to analyze the difference between two investment funds with an annual return of 7%.

The first fund has fees of 0.03% and the second of 0.8%.

After 30 years we will have as a final value

on the first fund:

Low Fee Value = 422'676.84 euros

and on the second fund:

High Fee Value = 367'906.04 euros

With a loss of:

Difference = 54'770.80 euros

Scrolling down we will see the year-by-year detail of the investment where:

• Year = years that have passed
• Investment = investment paid
• Total = investment plus interest and minus commissions
• Yield = interest
• Fees = commissions
• Additions = sum added in the year considered