How much are high fees costing you?
A small-sounding fee often has massive costs. The average mutual fund in Canada charges roughly 2% a year, while a low-cost index fund is often around 0.2%. Change the fees below to match your own situation and see what that difference adds up to over time.
How this works. Once a year your balance grows at the expected return, the fee is charged on the balance, and a year's worth of contributions is added. Net return is simply the expected return minus the fee, so 8% with a 0.2% fee compounds at 7.8% a year. Returns are assumed steady, which never happens in real life, so treat the result as an illustration of how fees compound, not a prediction.
This is general education, not personal financial, investment, or tax advice. Your own situation, fees, and returns will differ.
Want the story behind these numbers? I wrote about what a 2% fee really costs over a lifetime, and why it pulled me into financial planning.
Read: The real cost of a 2% fee