How fees compound
A yearly fee comes off your whole pot every year, so unlike a one-off cost, it compounds against you for as long as you hold.
A worked example
€10,000 growing at 7% a year for 30 years becomes about €76,000 with no fee. Take a 1% yearly fee and it grows at 6% net, ending at about €57,000. The fee alone cost about €19,000: roughly a quarter of the no-fee result.
Why "1%" feels small but isn't
A 1% fee looks tiny next to a 7% return. But it is not taken once: it is taken every single year, including the years the fund barely grows, and it compounds against your money exactly the way a return compounds for it.
The evidence on active funds
S&P's SPIVA scorecards, published regularly for both the US and Europe, consistently find that most actively managed equity funds trail their benchmark index over 10 to 15 years, after fees are taken out. A higher fee does not reliably buy a higher return.
Where to find your own fee
Every EU fund publishes a short official document showing its "ongoing costs" as a yearly percentage. It is the single most checkable number in the fund, because it never depends on how markets perform.
Key takeaways
- A yearly fee compounds against you the same way a return compounds for you.
- Over 30 years, a 1% fee can take about a quarter of the final result.
- SPIVA's regular scorecards find most active funds trail their index over 10 to 15 years after fees.