Expense ratios: the hidden drag on your portfolio
A 1% fee sounds small. Over 30 years, it's about 25% of your final balance.
An expense ratio is the annual fee a fund charges, expressed as a percentage of assets. A 1% expense ratio on $100,000 is $1,000 per year, subtracted automatically. It looks like a small number. It's not.
Why it compounds brutally
Every dollar paid in fees is a dollar that isn't invested, and every dollar not invested doesn't earn compounding returns. Over 30 years at an 8% market return, a 1% annual fee reduces your final balance by roughly 25% compared to a 0% fee baseline. A 2% fee — common in older 401(k) plans and actively managed funds — reduces it by roughly 45%.
The good news
Index funds now charge almost nothing. Vanguard's VTI costs 0.03%. Fidelity's FZROX costs 0%. These are not loss leaders or tricks — they're the result of two decades of price competition. Paying 1%+ for a mutual fund in 2026 is a choice, and usually a bad one. Check every fund in your portfolio right now — the savings over a lifetime can fund a car.
Put this into practice
Worth tracks your accounts, budgets, and goals — so the concepts in this article aren't just theory.
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