Fee drag

A 1% annual fee does not reduce your final balance by 1%. Because the fee is taken from returns that would otherwise have compounded, the drag grows over time. Over twenty or thirty years a 1% fee can easily eat a quarter or more of the portfolio.

Fee drag includes fund expense ratios, platform or brokerage fees, adviser charges, and any other cost that reduces your net return. Some fees are explicit, some are quietly deducted from fund performance.

The simplest way to estimate fee drag is to run the same projection with and without the fee. The gap between the two outcomes is the true cost.