Compound Growth & Fee Drag Calculator
See how compounding turns steady contributions into wealth, then see what a 2% fund fee takes back out of it, in dollars. Compare a high-MER fund against a low-cost index option, side by side.
Three growth paths
Gross return with no fee, versus your low-cost fund and your high-MER fund. The shaded band between the two fund lines is money lost to fees.
Fee drag by fee and horizon
How much of the low-cost balance each fund fee takes, by how long you stay invested. The longer you stay, the bigger the bite.
What built your low-cost balance
Your own deposits versus the growth earned on top of them, year by year, and when growth starts doing more of the work.
Year-by-year
Balance each year under the low-cost fund and the high-MER fund, and the fee gap between them.
| Year | Contributed | Low-cost balance | High-MER balance | Fee gap |
|---|
How this is calculated
Compounding with monthly contributions
Money is compounded monthly for accuracy even though results are shown per year. Each month the balance grows by the monthly rate rm = (1 + annual/100)^(1/12) − 1 and then your contribution is added: balance = balance × (1 + rm) + monthly. Applying the annual return as a compounded monthly rate (rather than dividing by 12) is the mathematically correct way to grow a stream of monthly deposits.
How fees are modelled
A fund's MER is charged on the whole balance every year, so it drags directly on your net return: net return = gross return − MER. A fund quoting a 5.2% gross return with a 2.0% MER actually compounds your money at 3.2%; the low-cost fund at 0.2% compounds at 5.0%. Because that gap compounds year after year, the damage grows non-linearly. Over 40 years a 2% MER can consume roughly 40% of your final balance versus a 0.2% index fund, even though in any single year it only costs 2%. The lifetime fee cost shown is the difference between the two final balances: real dollars that left your account as fees instead of compounding for you.
Fee drag by fee and horizon
The grid re-runs the same monthly compounding for each fund fee (rows) and each horizon (columns), with your deposits, your gross return and your low-cost fee. Each cell is 1 − balance at that fee ÷ balance at the low-cost fee, the share of the low-cost balance that fee would take. Your own fee and horizon always appear in the grid (they take the place of the nearest standard row or column), and the outlined cell is exactly the lifetime fee cost above as a share of your balance. Because both balances are deflated by the same factor, the share is the same in future or today's dollars. A negative share means that fee is below your low-cost alternative's.
What built your balance
For each year the chart splits the low-cost balance into the deposits you made so far and the growth on top: growth = balance − deposits, so the two layers always add up to the low-cost line on the growth-paths chart. The marker shows the first year growth reaches your deposits (the balance is at least double what you put in). If the net return, after inflation in today's dollars, is below zero, there is no growth to stack, so the chart draws the balance against your deposits and shades the shortfall instead.
The rule of 72
A quick sanity check: your money doubles in about 72 ÷ return% years. At a 5% net return that's ~14.4 years; bump the net return to 7% and it drops to ~10.3 years. Fees work the same way in reverse, every point of MER stretches your doubling time.
Real vs nominal
By default figures are nominal (raw future dollars). Turn on "today's dollars" to deflate by FP Canada's 2.1% long-run inflation assumption. A balance in year t becomes real = nominal ÷ (1 + 0.021)^t: a million dollars 30 years out only buys what about $535,000 buys today. Your deposits are deflated at the month each one goes in, not at the end, because an early deposit is already close to today's dollars: real deposits = start + Σ monthly ÷ (1 + 0.021)^(m/12) over months m = 1, 2, 3… So $500 a month for 30 years is $180,000 in future dollars but about $133,800 of today's buying power, and real growth is the real balance minus that figure.
Return presets
Balanced 5.2% is FP Canada's 2026 nominal assumption for a 60/40 portfolio (before fees). TSX 9.5% and S&P 500 12.6% (in CAD) are long-run historical averages, useful for illustration, but not a promise.
What this doesn't model
Taxes (results assume a registered account like a FHSA, TFSA or RRSP where growth compounds untaxed), trading commissions, contribution-room limits, variable returns or market crashes (it uses a smooth average), and rising contributions over time. For account-specific planning try the retirement planner or RRSP vs TFSA tool.
Common questions
How much does a 2% MER really cost over an investing lifetime?
Because fees compound just like returns, a 2% management expense ratio (MER) can consume roughly 40% of your final balance over 40 years compared with a 0.2% low-cost index fund. On a portfolio that would grow to about $1 million at low cost, the high-fee version might reach only $600,000, the missing $400,000 is the lifetime fee cost.
What is a typical mutual fund fee (MER) in Canada?
Canadian actively managed equity mutual funds have historically carried some of the highest fees in the world, commonly around 2.0% to 2.5% MER. Low-cost index ETFs and all-in-one asset-allocation ETFs typically charge about 0.20% to 0.25%. The difference sounds small, but it is charged on the whole balance every year, for as long as you hold the fund.
What is the rule of 72?
The rule of 72 is a shortcut for how long money takes to double: divide 72 by your annual return percentage. At a 7.2% return your money doubles in about 10 years; at 9% in about 8 years. The same rule shows fee damage, a fee that lowers your net return from 7% to 5% stretches your doubling time from about 10 years to about 14 years.
What return should I assume for a Canadian portfolio in 2026?
FP Canada's 2026 Projection Assumption Guidelines suggest about 5.2% nominal for a balanced 60/40 portfolio before fees, with inflation at 2.1%. Long-run historical figures are higher, roughly 9.5% for the TSX and 12.6% for the S&P 500 in Canadian dollars, but past returns are not guaranteed, so planning with the conservative FP Canada number is prudent.
What is the difference between real and nominal returns?
Nominal is the raw dollar figure; real deflates it by inflation so it reflects actual purchasing power. At 2.1% inflation, $1,000,000 in 30 years buys what about $535,000 buys today. Turning on the inflation-adjust switch converts every figure to today's dollars so future amounts don't look deceptively large.