Compound Growth & Fee Drag Calculator
See how compounding turns steady contributions into real wealth, then see how a 2% fund fee quietly eats a huge slice of it. 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 gap between the lines is money lost to fees.
What built your low-cost balance
Your own contributions versus growth earned on top of them.
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 (the important part)
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.
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 and pushes your finish line back.
Real vs nominal
By default figures are nominal (raw future dollars). Turn on "today's dollars" to deflate everything by FP Canada's 2.1% long-run inflation assumption: real = nominal ÷ (1 + 0.021)^years. A million dollars 30 years out only buys what about $535,000 buys today, so the real view keeps the numbers honest.
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 compounds into a very large gap over decades.
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.