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Costs & fees
More than the label suggests. An expense ratio is a return you don’t get, taken out every year for as long as you hold the fund. Portfolio Lab’s own backtest engine subtracts it from every single month of return, the same way it treats a market loss. Over a real 30-year horizon, the gap between a 0.03% index fund and a 1% fund can compound into a five-figure difference on an ordinary account — even though the annual number is under one percentage point.
Portfolio Lab treats a fund’s expense ratio as a monthly cost: each month, before anything else compounds, it subtracts expense ratio ÷ 12 from that month’s return. A 1%/yr fee isn’t taken once — it’s about 0.083% every single month, deducted whether the market was up or down, and then compounded against for as long as you hold the fund.
Same $10,000, the same 30 years, the same ~7%/yr real return — the inflation-adjusted figure this site’s own century-plus backtest of US stocks produces (nominal is closer to 10%/yr; long-run inflation averages ~3.5%/yr). The only thing that changes below is the fee:
| Expense ratio | Effective annual return | $10,000 after 30 years |
|---|---|---|
| 0.03% | 6.97% | $75,486 |
| 0.50% | 6.50% | $66,142 |
| 1.00% | 6.00% | $57,435 |
The 1%-fee fund gives up roughly $18,000 — about a quarter of the ending balance — to fees alone, with no difference in what the market actually did. Add a monthly contribution and the gap widens further, since every dollar you add loses the same fraction every year it stays invested.
See it on your own numbers
Portfolio Lab’s backtest and projection tool has an expense-ratio field built in — enter a fund’s actual expense ratio and it’s subtracted from every month of history and every Monte Carlo path, no manual math required.
See a 1% fee applied to a sample mix →Portfolio Lab's own portfolio check flags anything at or above 0.30%/yr as worth a second look — about ten times what a broad index fund like VTI or VOO charges (0.03%, see VTI vs VOO). Most of the gap between a cheap and an expensive portfolio comes from clearing that bar without a specific reason, not from picking the single 'best' fund.
Yes, just less dramatically. A fee is subtracted every month for as long as you hold the fund, so even a fraction of a percent compounds over decades. The gap scales roughly with the size of the fee difference and the number of years — a 0.15-point gap over 30 years costs meaningfully less than the 1-point example above, but it isn't zero.
Yes. Portfolio Lab's backtest and projection tool has an expense-ratio field built in — enter a fund's actual expense ratio and it's subtracted from every month of history and every Monte Carlo path, so you see the dollar effect on your own mix instead of a generic number.
Educational, not advice. The $10,000/30-year table assumes a constant ~7%/yr real return for illustration, matching this site’s own long-run backtest of US stocks; actual returns vary year to year, which is why the live tool runs a full historical backtest and Monte Carlo projection instead of a flat rate.