Unit 4 · Level 2 · Costs & taxes
Fees compound too
You know compounding works FOR you. Bad news: fees compound AGAINST you with the same relentless maths. A 1% yearly fee sounds like a rounding error, but every euro it removes stops growing forever. Over 40 years of saving, that 'tiny' 1% can consume roughly a third of your final pot. Same snowball, rolling in the wrong direction.
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What you get asked
Your portfolio is worth €200,000 and your all-in costs are 1.5% a year. How much do you hand over in fees this year alone?
1.5% of €200,000 = €3,000, and it goes out every year, whether markets rise or fall. Percentage fees hide their size; converting them to euros is how you see them clearly.
Why does a yearly fee hurt far more than its small percentage suggests?
The fee's real price is the fee PLUS everything it would have grown into. That's why a 1% drag can swallow a third of a 40-year pot rather than 1% of it.
Put the fee-drag snowball in order
No single year looks dramatic, and that's the trap. Fee drag is invisible in any one statement and enormous across a lifetime.
Over 40 years, a 1% yearly fee can consume roughly a ___ of your final wealth.
Growing at 6% instead of 5% for 40 years ends up roughly a third richer; that entire difference is what the 1% fee took. Rerun it with the rule of 72 if you enjoy being outraged.
Why do experienced investors obsess over costs more than over predictions?
Nobody controls what markets return, but everyone controls what they pay to be there. A saved 1% fee is the rare 'return' you lock in with total certainty. 🐜
The rest of this unit
Fees, frictions, and tax drag: the leaks you can control.