How the ETF projection works
An ETF's return compounds monthly on your invested balance, and the expense ratio subtracts from that return every single year. The calculator nets the two first — effective annual return = expected return − expense ratio — then applies the standard future-value formula with monthly contributions:
FV = P₀(1+r)ⁿ + PMT × ((1+r)ⁿ − 1) ÷ r
where r is the monthly net return and n the number of months. It then reruns the identical projection at 0% fees; the gap between the two is the true dollar cost of the fund over your holding period — not the 0.2% you see quoted, which looks harmless but compounds against you for decades.
Worked example
$10,000 initial, $500 monthly, 7% return, 0.2% expense ratio, 20 years. Net return 6.8% grows the account to roughly $293,000. The same investments in a hypothetical free fund would reach about $301,000 — so the fee cost is roughly $7,800, or more than a year of contributions. Move to a 1.0% actively managed fund and the fee bill multiplies about fivefold. This is why fee comparison is the single highest-leverage decision in passive investing.
Reading the results honestly
The expected return input is a guess, not a promise: 7% nominal is a common long-run equity assumption, but sequences of returns vary enormously. Use the calculator to compare strategies and fees — where the maths is exact — rather than to pin hopes on a final number.