A recurring charge affects this year's balance and the money left to compound in later years. Our video compares two simplified portfolios to make that relationship visible.
Watch the original Finance Hub video ↗The assumptions
Start with €100,000, make no further contributions and assume constant 6% gross annual growth for 20 years. Subtract the annual cost rate from that gross rate, then compound annually.
The two balances
At 0.2% annual costs: €100,000 × 1.058^20 = €308,826. At 1.2%: €100,000 × 1.048^20 = €255,403. The difference is €53,423, rounded to €53,000 in the video.
The limitations
Real markets do not deliver a smooth 6% each year. Products charge costs differently, and this model excludes tax and inflation. The gap represents both costs and the subsequent growth forgone; it is not simply a sum of fee invoices.
Turn the example into a review
List product, platform and service charges. Check the exposure, tax treatment, liquidity, access and any cost of switching before drawing a conclusion from a quoted percentage alone.
Sources and method
Ending balances were independently recalculated using the explicit formulas above. These are illustrations, not expected returns or product recommendations.