Passive vs Active Fund Calculator

Active fund fees compound away returns. 100,000 at 7% gross over 30 years: at 0.2% fee (passive) = approximately 579,000. At 1.5% fee (active) approximately 358,000. The 1.3% fee gap compounds into a 221,000 gap — roughly 38% of the passive result. Research consistently shows most active funds underperform passive after fees over long horizons. The fee drag is real and usually uncompensated.

Run it with sensible defaults

Using investment of 100,000, expected gross return of 7%, passive fee of 0.2%, active fee of 1.5%, the calculation works out to 221,281.80. The defaults are meant as a starting point, not a recommendation.

The levers in this calculation

The inputs — Investment, Expected Gross Return, Passive Fee, Active Fee, and Horizon — do not pull with equal force. Two inputs usually tip the answer one way or the other. Identify which ones matter most by flipping each value past a round threshold and watching whether the option with the lower calculated total changes.

How the math works

Net return = gross minus fee. Future value calculated at net return for each fund type. Ignores active outperformance which historically averages near zero after fees.

Where this fits in planning

This is a "what-if" tool, not a forecast. Use it to test ideas before committing: what happens if the rate is 2% lower than hoped, what happens if you add five more years. The value is in the scenarios you run, not the single answer you get from the defaults.

What this doesn't capture

Steady-rate math ignores real-world volatility. Actual returns are lumpy; sequence-of-returns risk matters most in drawdown; fees and taxes drag on compound growth; and behaviour changes in drawdowns can reduce outcomes below the projection. The number represents one scenario rather than a forecast.

Worked example

Suppose you invest 50,000 with an expected gross return of 6% annually over 25 years. A passive fund charging 0.3% annually would grow to approximately 194,000. The same starting amount in an active fund charging 1.2% would grow to approximately 134,000. The 0.9% fee difference creates a gap of roughly 60,000 in final value — about 31% of the passive outcome. This gap widens with longer time horizons and higher initial investments.

Common scenarios

• New investor, long horizon: Small fee differences appear large because compounding operates over decades. A 0.5% fee difference on a 30-year investment can translate to 20–30% of wealth.
• Larger portfolio: Fee drag on larger sums produces larger absolute numbers. A 1% fee on 500,000 removes 5,000 in year one; on a 50,000 portfolio, it removes 500.
• Lower expected returns: When gross returns are modest, fee drag consumes a higher percentage of total gain. A 3% gross return minus 1% fee leaves only 2% net — a 33% reduction.
• Short holding period: Fee differences matter less over 3–5 years, but still accumulate measurably over 10+.

What the result shows and does not show

The calculator models the cumulative cost of fees applied consistently over your investment horizon, assuming identical gross returns across both fund types. It illustrates how expense ratios compound into material wealth differences.

It does not account for:

• Active manager outperformance or underperformance beyond the fee difference
• Tax treatment of distributions
• Market volatility or actual sequence of returns
• Changes in fees over time
• Investor behaviour (buying high, selling low)
• Inflation effects on purchasing power

Educational tool

This calculator is designed for illustration and learning. The output models one scenario based on your inputs; it does not constitute a prediction of actual results or a substitute for personal financial planning.