# What will my index fund grow to?

Computes the growth of an index fund investment with monthly additions at an expected return after its expense ratio, and how much more it keeps than a fund with a higher expense ratio.

- Page: https://www.acalculator.org/finance/index-fund-calculator
- JSON spec: https://www.acalculator.org/finance/index-fund-calculator.json
- Version: c7a4bf92289b

## Default answer

Example with the default inputs (Initial investment $10,000.00, Added each month $500.00, Expected return (yearly) 7%, Expense ratio 0.05%, Years 30, Compare with an expense ratio of 1%): $10,000.00 plus $500.00 a month at 7% a year, with a 0.05% expense ratio, grows to $653,984.17 in 30 years.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| initial | Initial investment | The amount you invest at the start. |
| monthly | Added each month | An amount invested at the end of every month. Leave it empty or 0 for none. |
| ret | Expected return (yearly) | The yearly return of the index before the fund’s expenses. Type your own estimate. |
| er | Expense ratio | The index fund’s annual expense ratio, from its prospectus or fact sheet. |
| years | Years | How many years you stay invested. |
| compare | Compare with an expense ratio of | The expense ratio of another fund, for example an actively managed fund, to compare with. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| value | Index fund value | The value at the end, after the expense ratio. |
| paidIn | Money put in | The initial investment plus every addition. |
| growth | Growth | The value minus the money put in. |
| expenses | Expenses paid | All the monthly expenses of the index fund added up. |
| other | Value in the higher-fee fund | The same money at the same return after the comparison expense ratio. |
| kept | Kept by the lower fee | The index fund’s value minus the higher-fee fund’s value. |

## Method

Each month: value × (1 + R)^(1/12), less a twelfth of the expense ratio on that, plus the monthly addition; the comparison fund runs the same with its own expense ratio.

## Assumptions

- The index return is the same every year; real index returns go up and down, and past returns do not predict future ones.
- Additions are made at the end of each month.
- Taxes, trading costs and tracking error are not included. This is an estimate, not investment advice.

## Worked examples

1. initial = $100,000.00, monthly = $0.00, ret = 4%, er = 0.25%, compare = 1%, years = 20 gives value = $208,424.99, other = $179,379.03, kept = $29,045.96. Source: SEC Investor Bulletin, How Fees and Expenses Affect Your Investment Portfolio: about $208,000 with a 0.25% fee and $179,000 with 1% after 20 years (https://www.investor.gov/sites/default/files/ib_fees_expenses.pdf).
2. initial = $0.00, monthly = $500.00, ret = 7%, er = 0%, years = 30 gives value = $584,726.30, paidIn = $180,000.00. Source: Future value of monthly additions at the monthly rate (1 + R)^(1/12) − 1 (Microsoft Excel FV function, https://support.microsoft.com/en-us/office/fv-function-2eef9f44-a084-4c61-bdd8-4fe4bb1b71b3).
3. initial = $10,000.00, monthly = $500.00, ret = 7%, er = 0.05%, compare = 1%, years = 30 gives value = $653,984.17, other = $537,957.29, expenses = $3,464.21. Source: SEC Investor Bulletin, How Fees and Expenses Affect Your Investment Portfolio: an ongoing fee reduces the value (https://www.investor.gov/sites/default/files/ib_fees_expenses.pdf).

## FAQ

### How much will my index fund grow?

It depends on the return, which no one knows in advance. At a steady 7% a year, $500 a month for 30 years grows to $584,726 before fees, from $180,000 put in. With a 0.05% expense ratio and $10,000 to start, it reaches $653,984. Try several returns to see a range; the calculator never looks up past index returns.

### Why do index funds cost less?

An index fund buys the securities in an index, such as the S&P 500, instead of paying managers to pick them, so its expense ratio is usually low (often 0.03% to 0.20% a year). Actively managed funds often charge 0.5% to 1% or more. The difference compounds: in the SEC’s example, $100,000 at 4% for 20 years ends near $208,000 with a 0.25% fee and near $179,000 with 1%.

### What does the comparison fund show?

The same money, added on the same days, at the same return, but with the comparison expense ratio (1% by default). “Kept by the lower fee” is how much more the index fund is worth at the end. Leave the comparison empty to hide it.

### Is the return before or after the expense ratio?

Before. Type the return of the index itself; the calculator takes the expense ratio out month by month, as a fund does. An index return of 7% with a 0.05% expense ratio gives about 6.95% a year to you.

### What return should I use for an S&P 500 index fund?

The page does not suggest one. Long-run returns of U.S. stock indexes have varied a lot by period, and future returns may be lower or higher. A cautious plan tries a low, a middle and a high return.

### Does it include taxes or dividends?

The return you type should include reinvested dividends (a total return). Taxes on dividends and gains, trading costs and the small gap between a fund and its index (tracking error) are not included.

## Sources

- U.S. Securities and Exchange Commission, Investor.gov: Index Funds. https://www.investor.gov/introduction-investing/investing-basics/investment-products/mutual-funds-and-exchange-traded-4
- U.S. Securities and Exchange Commission, Investor Bulletin: How Fees and Expenses Affect Your Investment Portfolio. https://www.investor.gov/sites/default/files/ib_fees_expenses.pdf
- U.S. Securities and Exchange Commission, Investor.gov: Understanding Fees. https://www.investor.gov/introduction-investing/getting-started/understanding-fees