Index Fund Calculator

Project index fund growth with low expense ratio vs managed fund comparison.
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Index Fund Value

$1.1M

Managed Fund Value

$915.4K

Fee Savings

$207.7K

Comparison

Total Contributed$180,000.00
Index Fund (0.03% ER)$1.1M
Managed Fund (1.00% ER)$915.4K
Extra from Low Fees$207.7K

Use the Index Fund Calculator above to calculate your results. Enter your values and see instant results — all calculations run in your browser.

Disclaimer: This calculator is for informational purposes only and does not constitute tax, financial, or legal advice. Results are estimates based on the information you provide and current rates. Always consult a qualified tax professional or financial advisor for advice specific to your situation.

How It Works

This calculator helps you visualize the powerful difference a low-cost index fund can make compared to a traditional actively managed fund over time. It highlights how even small differences in expense ratios can lead to substantial wealth discrepancies, especially by the year 2026 and beyond. Understanding this impact is crucial for optimizing your investment returns.

Our calculator uses a compound interest formula, factoring in your initial investment, annual contributions, expected annual return, and crucially, the expense ratios of both fund types. The formula for the future value of an investment is FV = P(1+r/n)^(nt) + PMT * [((1+r/n)^(nt) - 1) / (r/n)], where 'r' is the net annual return (gross return minus expense ratio). This allows for a direct comparison of net growth after fees.

Remember that past performance doesn't guarantee future returns; the projected growth is an estimate. A common mistake is focusing solely on gross returns without accounting for the corrosive effect of high fees over decades. Also, consider the tax implications of your investment choices, as these are not factored into this specific calculation.

Example: Investing $10,000 with $500 monthly contributions

  1. 1 Let's say you invest an initial $10,000 today and contribute an additional $500 per month. We'll assume a gross annual return of 8% for both fund types, a 0.05% expense ratio for the index fund, and a 1.2% expense ratio for the actively managed fund.
  2. 2 By the end of 2026, with an index fund (0.05% ER), your investment would grow significantly. The actively managed fund (1.2% ER), despite the same gross return, will have a noticeably lower net return due to its higher fees.
  3. 3 By December 31, 2026, the index fund balance could be approximately $46,500, while the actively managed fund balance might be closer to $45,200. This $1,300 difference, accumulated in just a few years, demonstrates the power of low fees.
  4. 4 This example clearly illustrates how even a seemingly small difference in expense ratios compounds over time. Over longer periods, this gap widens dramatically, highlighting why prioritizing low-cost index funds is a cornerstone of effective long-term investing.

Source: SEC · Last updated: April 2026

Frequently Asked Questions

How much should I invest in index funds?
Many financial advisors recommend index funds as the core of your portfolio (60-90% of stock allocation). The amount depends on your goals, timeline, and risk tolerance. Even $100/month invested in a broad market index fund grows significantly over decades due to compounding.
What is a good expense ratio for an index fund?
Top index funds charge 0.03-0.10% annually. Anything below 0.20% is good. Avoid funds charging above 0.50% for passive indexing. Over 30 years, the difference between a 0.03% and a 1% expense ratio costs over $100,000 on a $10,000 initial investment with monthly contributions.
Do index funds outperform managed funds?
Over 15+ year periods, roughly 85-90% of actively managed funds fail to beat their benchmark index after fees. Low-cost index funds provide broad diversification and consistently strong long-term returns, which is why they are recommended for most investors.

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