Fees reduce the balance that keeps working
Funds, advisers and accounts can charge transaction or ongoing fees. An expense ratio is an annual fund operating cost expressed as a percentage of assets. Because the fee is removed from assets, it also removes money that otherwise could have earned future returns.
Turn a percentage into dollars
Use Terra's Investment Fee Calculator to compare two annual costs over time. Keep the gross return assumption the same so you are isolating the effect of cost.
Compare investment fees →Taxes depend partly on the account
Inside a tax-advantaged retirement account, buying and selling investments generally does not create the same current capital-gains tax treatment as a taxable brokerage account. In a taxable account, dividends, interest, realized gains and fund distributions can create current tax consequences.
Low fee does not mean good investment
Cost is one characteristic, not the whole decision. A low-cost investment that does not fit your goal or risk tolerance is not automatically better. Compare like with like: purpose, risk, holdings and cost.
Tax efficiency is not tax avoidance
Different account and investment structures can change when taxes are paid, but tax rules are detailed and change over time. Terra's role is to make tradeoffs visible, not replace tax advice.
The fee does not just leave once — it stops compounding too.
In a Terra illustration, $100,000 growing for 30 years at a 7% effective annual gross return ends near $716,852 when the modeled annual cost is 0.20%, versus about $563,079 at a 1.00% annual cost. The modeled difference is roughly $153,773. The fee dollars themselves are only part of that gap; money paid in costs is also money that no longer earns future returns.
This comparison intentionally holds the gross return constant. It does not say the higher-cost service is automatically a poor value. It makes the cost hurdle visible so the service received can be judged against it.
Common mistake
Looking only at the headline advisory fee and forgetting fund expenses, trading costs, taxes or other account charges — or, in the other direction, assuming the lowest-cost option is automatically the best fit.
What could change the answer?
Services received, account type, investment turnover, fund structure, tax bracket, holding period, contribution pattern and whether a professional prevents costly planning or behavioral mistakes.
Quick check
Why can a 1% recurring fee matter more than it first appears?
Primary references
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