The silent cost of ETF fees.

A management expense ratio (MER) is the annual fee charged by an ETF or managed fund, expressed as a percentage of assets under management. For example, a 0.07% MER on a $100,000 portfolio costs $70 per year. The fee is deducted daily from the fund's net asset value, so you never see a direct charge — but it reduces your return each year.

The compounding effect is substantial. A 0.6% MER difference on a $50,000 portfolio with $10,000 annual contributions at 8% gross return leaves you roughly $60,000–$80,000 poorer after 20 years compared with the cheaper fund — despite the fee seeming small each year. The drag compounds because fees are charged on a growing balance.

Most broad-market Australian ETFs charge 0.05%–0.20% MER. Common funds like VAS (Vanguard Australian Shares) charge 0.07%, while VGS (Vanguard International Shares) charges 0.18%. Actively managed funds typically charge 0.50%–1.50%, sometimes higher. For long-term index investing, keeping MER below 0.20% is a reasonable benchmark.

MER is the most significant ongoing fee, but there are others: brokerage to buy and sell, bid-ask spread, and potential buy/sell spreads built into the fund's unit pricing. For buy-and-hold investors using low-cost ETFs, MER dominates the fee picture. This calculator focuses on MER drag as it is the primary determinant of long-run cost difference between funds.

No — this calculator shows pre-tax balances to isolate the pure impact of MER on your wealth. In practice, distributions from ETFs are taxable each year (at your marginal rate or 15% inside super). A low-MER ETF also tends to be more tax-efficient because it generates fewer taxable events than an actively managed fund.