What a 0.1% fee difference becomes in 20 years — the compounding of costs
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0.1% a year looks trivial. Compounded over 20 years, it's a different story.
The fee leaks out daily, quietly
The expense ratio (TER) is the annual rate the manager deducts from assets while you hold the ETF. It isn't shown in the quote; it comes out of NAV a little each day, so it's easy to never notice.
The catch: it's taken every year, not once — shrinking the principal that would otherwise reinvest and compound.
The difference, in numbers
Put $100k into a 7%-return asset for 20 years. At 0.05% fees (net 6.95%) you get about $382k; at 0.5% fees (net 6.5%) about $352k.
A mere 0.45%p gap becomes ~$30k after 20 years — 30% of the original stake. The longer the horizon and larger the sum, the wider it gets.
Same index? Take the cheaper one
ETFs tracking the S&P 500 hold essentially the same stocks regardless of issuer. Then fees decide the outcome — for the same index, the lower-fee ETF almost always wins long term.
That said, premium/discount, liquidity and tracking error can matter more than a tiny fee gap, so treat the expense ratio as the tiebreaker when else is equal.
Bottom line
Small as it looks, the fee compounds into a real gap. When comparing ETFs on the same index, always check the expense ratio — you can see them side by side in ETF Scanner's compare tool.
The fee is charged whether you gain or lose
Thinking of the expense ratio as money taken out of your profit understates it. It is deducted from net assets a little each day. In a year the fund falls 20%, the fee is still charged in full.
So a fee does not reduce your return, it lowers your starting line. A 0.5% product begins each year at −0.5% and tracks the market from there. Over twenty years the line moves back more than ten times.
It is also invisible. The cost is already inside the published NAV, so nothing in your account ever reads 'fee charged'. It is not a bill you see; it is money that was never there.
When two funds track the same index
Funds tracking the same index hold nearly the same names, so performance is decided by cost and tracking, not stock picking. The cheaper one has a structural head start.
But price alone is a trap. Tiny funds get closed or merged, and a thin order book can cost you more in spread on one trade than you saved in a year of fees.
Use an order: is the fund large enough, does it trade enough for your size, and only then compare fees. Fee differences matter only among candidates that clear the first two.
Where to check it here
The overview table on each ETF page shows the annual expense ratio next to net assets. Put up to three same-index candidates side by side in the compare screen to line up fees, size and returns.
Do not start from the return ranking — it flips depending on where you cut the period. The fee is a contracted number and does not flip. Start with what cannot move.
This article is general information, not investment advice. Investment decisions and responsibility are your own.