What managed fund fees cost over time.
Lost to fees
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Balance after fees
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Balance with no fees
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Your breakdown
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The cost that hides in plain sight
Managed funds make investing easy: someone else picks the holdings, rebalances, and handles the admin. The price is an annual fee, quoted as a percentage of your balance, and because it is deducted quietly from the fund rather than billed to you, most investors never feel it. That is exactly why it is dangerous. A fee skims a slice of your money every year, in good years and bad, and the slices it takes early are the ones that would have compounded the longest. This tool runs your investment twice on the same return, once paying the fee and once fee-free, so the cost stops being abstract.
How the projection works
You enter a starting balance, a yearly contribution, a return before fees, the fund’s annual fee, and a time horizon. The tool deducts the fee from the return to get a net growth rate, then compounds your balance and contributions at that rate, adding each year’s contribution at the start of the year. It runs an identical path at the full pre-fee return for comparison. The gap between the two ending balances is what the fee removed. The default scenario is a $50,000 starting balance, $6,000 added each year, a 6 percent gross return, a 1.2 percent fee, and 25 years.
A 1.2 percent fee across 25 years
On those defaults, the fee-free path grows to roughly $563,532. The same investment in a fund charging 1.2 percent a year reaches about $453,401. The fee cost you around $110,131, which is more than your entire $50,000 starting balance and almost a fifth of the fee-free result. That is the brutal arithmetic of percentage fees over decades: a number that sounds trivial each year turns into a six-figure hole by the end.
Active funds, index funds, and the fee gap
The biggest lever you control is whether you pay for active management. Actively managed funds, where a manager tries to beat the market by picking winners, commonly charge somewhere around 1 to 1.5 percent. Passive index funds, which simply track a market index, often charge a small fraction of that, sometimes under 0.5 percent. The uncomfortable evidence is that most active managers do not beat their index after fees over long periods, so you are frequently paying more for a worse result. Put the two fee levels into this tool on the same return and the case for low-cost index funds, for the core of a long-term portfolio, usually speaks for itself.
Tax sits beside the fee, not inside it
Keep fees and tax mentally separate. Most New Zealand managed funds are Portfolio Investment Entities, so returns are taxed inside the fund at your prescribed investor rate of 10.5, 17.5, or 28 percent, with 28 percent the top PIE rate even for high earners, which is a genuine advantage over paying tax at a 39 percent personal rate. There is no general capital gains tax here, so you are not taxed again on gains when you sell units. If your fund is not a PIE and holds overseas shares above the $50,000 cost threshold, the foreign investment fund rules can apply instead. Either way, the fee in this tool is a separate cost paid to the manager, so treat your entered return as an after-tax, before-fee figure for the cleanest comparison.
Is a higher fee ever worth it?
Occasionally. A fund offering genuine diversification you cannot easily get elsewhere, or a specialist strategy, might justify a higher fee. But the bar is high, because the fund has to beat a cheap index by more than the fee difference every year, consistently, to leave you ahead. For most people, most of the time, the lower fee wins.
What counts as the fee I should enter?
Use the total annual fund charge, which bundles the management fee and other ongoing costs, and add any performance fee if one applies. Buy and sell spreads or one-off entry fees are separate and not captured here, so for a regular-contribution plan the ongoing annual fee is the figure that matters most over the long run.