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History's lessons for today's decisions ／ Calculate with Your Own Numbers

Calculating the accumulation of fees

What percentage of the principal does a 1% annual fee erase over twenty years?

How Fees Add Up: A 3-Minute Guide

  1. See it
  2. In numbers
  3. What would you do?
  4. Read more

1See it

Swipe to see more

1 / 6

Fees are deducted every year you hold the investment.

2 / 6

They pile up with compound interest, regardless of performance.

3 / 6

You pay fees when you buy, while you hold, and when you sell.

4 / 6

Add all three to get a single annual percentage.

5 / 6

How much of your principal does a 1% annual fee eat away in 20 years?

6 / 6

Portion lost = 1 − (1 − annual fee rate) ^ number of years

2In numbers

1%

Initial annual fee rate for the calculator. It shows the percentage and amount lost on 1,000,000 over 20 years.

20years

Initial number of years for the calculator.

3What would you do?

You're told, 'The fee is only 1% a year.' What do you think?

Pick one

It's a small amount, so I'll ignore it.

Annual fees pile up with compound interest, regardless of performance. Enter the number of years into the calculator to see how much of your principal will be lost.

I'll calculate it based on the number of years.

Exactly. Add up the fees for buying, holding, and selling to get an annual rate, then enter that with the number of years.

4Read more

Read the full story ↓

When to use　When you see an annual fee that you pay for as long as you hold an asset.

Fees deducted annually accumulate with compound interest, regardless of performance. Add the fees for buying, holding, and selling, then enter the total as a single annual percentage.

Try with your own numbers

If you change the numbers, it recalculates on the spot. The formula is written below.

Input value

Output value

Percentage erased（%）—
Amount erased（10,000 yen）—

Formula　Percentage Erased = 1 − (1 − Annual Fee Rate)^Number of Years

Related Lectures and Notes

P2　P6　Calculating simple and compound interest

Back to "Everyday Money: Calculations and Procedures" list

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