The 1% Fee Study
What can one percentage point of annual investment cost mean when the starting portfolio is $100,000, $250,000, $500,000, $1 million or $2 million — and the clock runs for 10, 20 or 30 years?
“One percent” sounds small because the percentage is small. The dollar effect can become large because the charge grows with the portfolio and every dollar removed stops compounding. This study isolates that mechanism with the same annual fee timing used by Terra's Investment Fee Calculator.
Short answer: under this controlled scenario, a $1 million starting portfolio growing at a fixed 7% gross annual return ends about $188,095 lower after 10 years, $704,643 lower after 20 years and $1,981,467 lower after 30 years when a 1.00% annual cost is applied instead of 0.00%.
The fee itself is only part of the cost. In the $1 million / 30-year scenario, cumulative modeled fee dollars are about $835,572, while the ending-value gap reaches about $1,981,467. The difference is lost compounding on money that left the portfolio earlier.
1. The study assumptions
| Variable | Study assumption |
|---|---|
| Starting balances | $100,000 · $250,000 · $500,000 · $1,000,000 · $2,000,000 |
| Time horizons | 10 · 20 · 30 years |
| Gross annual return | 7.00% every modeled year |
| Annual contribution | $0 — intentionally excluded so starting balance and fee effect stay easy to isolate |
| Cost scenario | 1.00% of the portfolio each year |
| Comparison scenario | 0.00% annual cost |
| Timing | Portfolio grows for the year, then the annual percentage cost is removed |
| Not modeled | Taxes, inflation, withdrawals, market volatility, changing returns or advisor/service value |
Investor.gov and FINRA both emphasize that ongoing investment fees reduce the amount left invested and therefore reduce future compounding.12 Terra's study uses a different scenario grid so readers can see how the same one-percentage-point cost scales with portfolio size and time.
2. What happens to $1 million?
Modeled ending-value gap
Modeled ending-value gap
Modeled ending-value gap
Notice how the gap accelerates. The annual charge is larger when the portfolio is larger, and earlier fees no longer have the chance to earn future returns. That is why the ending-value difference grows faster than a simple “1% × number of years” mental shortcut.
3. Portfolio size changes the dollars — not the percentage pattern
Because all five scenarios use identical return, time and fee assumptions, doubling the starting balance roughly doubles the dollar gap. The percentage impact is the same: after 30 years, the ending-value gap is about 26.0% of the zero-cost ending balance in this specific model.
4. The complete published table
| Start | Years | Ending @ 1.00% | Ending @ 0.00% | Ending gap | Gap % | Cumulative fees |
|---|---|---|---|---|---|---|
| $100,000 | 10 | $177,906 | $196,715 | $18,809 | 9.6% | $14,057 |
| $100,000 | 20 | $316,504 | $386,968 | $70,464 | 18.2% | $39,066 |
| $100,000 | 30 | $563,079 | $761,226 | $198,147 | 26.0% | $83,557 |
| $250,000 | 10 | $444,764 | $491,788 | $47,024 | 9.6% | $35,143 |
| $250,000 | 20 | $791,260 | $967,421 | $176,161 | 18.2% | $97,664 |
| $250,000 | 30 | $1,407,697 | $1,903,064 | $495,367 | 26.0% | $208,893 |
| $500,000 | 10 | $889,528 | $983,576 | $94,047 | 9.6% | $70,286 |
| $500,000 | 20 | $1,582,521 | $1,934,842 | $352,321 | 18.2% | $195,328 |
| $500,000 | 30 | $2,815,394 | $3,806,128 | $990,734 | 26.0% | $417,786 |
| $1,000,000 | 10 | $1,779,056 | $1,967,151 | $188,095 | 9.6% | $140,572 |
| $1,000,000 | 20 | $3,165,042 | $3,869,684 | $704,643 | 18.2% | $390,657 |
| $1,000,000 | 30 | $5,630,788 | $7,612,255 | $1,981,467 | 26.0% | $835,572 |
| $2,000,000 | 10 | $3,558,113 | $3,934,303 | $376,190 | 9.6% | $281,143 |
| $2,000,000 | 20 | $6,330,084 | $7,739,369 | $1,409,285 | 18.2% | $781,314 |
| $2,000,000 | 30 | $11,261,576 | $15,224,510 | $3,962,934 | 26.0% | $1,671,144 |
Download the data and workbook.
The Excel file contains the published results, assumptions, formulas, a 30-year chart and a separate 1.00% vs. 0.10% sensitivity sheet.
5. But 0% is not a real-world benchmark
Correct. The 0.00% comparison is there to isolate one percentage point of annual cost. Real funds, platforms and services can have expenses. A more practical sensitivity comparison is 1.00% vs. 0.10% — a 0.90 percentage-point difference.
| Start | 30 yr @ 1.00% | 30 yr @ 0.10% | Ending gap | Gap % |
|---|---|---|---|---|
| $100,000 | $563,079 | $738,717 | $175,638 | 23.8% |
| $250,000 | $1,407,697 | $1,846,792 | $439,095 | 23.8% |
| $500,000 | $2,815,394 | $3,693,584 | $878,190 | 23.8% |
| $1,000,000 | $5,630,788 | $7,387,168 | $1,756,380 | 23.8% |
| $2,000,000 | $11,261,576 | $14,774,336 | $3,512,760 | 23.8% |
6. Cost is measurable. Value is a separate question.
A 1% advisory fee may include planning, tax coordination, portfolio management, behavioral coaching, estate coordination or other services. Terra does not conclude that every 1% relationship is “bad.” The correct question is whether the value received is worth the cost for that investor.
7. How this connects to Terra's calculator
The study follows the same basic annual timing used by Terra's Investment Fee Calculator: apply the gross annual return, remove the annual percentage cost, then add any annual contribution. This study sets contributions to zero so the fee effect is easier to inspect. You can use the calculator to change the return, fee levels, years and annual additions.
8. Cite this study
Terra Investor Tools Editorial Team. “The 1% Fee Study: What One Percentage Point Can Cost Over Time.” Terra Investor Tools, Sep. 8, 2026. https://terrainvestortools.com/research/one-percent-fee-study.html
If you reuse a number, keep the scenario assumptions with it: 7% gross annual return, no contributions, growth first then annual cost, and the stated time horizon.
9. What would change the answer?
- Different returns: higher or lower gross returns change both ending balances and lost compounding.
- Contributions: recurring additions create more dollars on which a percentage cost can be charged.
- Different fee levels: the impact depends on the actual difference in ongoing costs.
- Taxes and account type: taxable accounts, IRAs and workplace plans can have different tax consequences.
- Withdrawals: spending from the account changes the balance path and therefore the fee dollars.
- Service value: a cost comparison does not measure the usefulness of planning or advice.
One click helps Terra see which research deserves expansion. No portfolio inputs are sent with this feedback.
Dataset reuse: The downloadable Terra dataset is available under the Terra Dataset License.
Primary and regulatory references
- Investor.gov — How Fees and Expenses Affect Your Investment Portfolio. Updated investor bulletin, July 23, 2025.
- FINRA — Fees and Commissions. Investor education on transaction and ongoing investment costs.
Educational modeled research only. This study does not predict returns, evaluate a particular investment product or determine whether an advisory relationship is worth its cost.