Lesson 3 of 4 · 3 min read
Costs (TER) matter
How 1% a year eats away your wealth.
What is TER?
Total Expense Ratio = a fund's annual costs, as a %. A broad ETF often costs 0.07-0.22%; active funds 1.5%+.
The compounding effect of costs
1% costs per year seems small, but over 30 years it can eat up 25% of your final amount. Low costs = more for you.
You put in $36,000. The other $42,139 is pure compound growth. Time does most of the work.
In practice
€100,000 over 30 years at 7%: with 0.2% costs you keep ~€720k, with 1.5% costs only ~€500k. Same fund, but a €220,000 difference — purely due to costs.
Remember this
- TER = a fund's annual costs as a %; broad ETFs often cost 0.07-0.22%.
- Costs compound too — 1% per year can eat up ~25% of your final amount over 30 years.
- The same fund can make a €200,000+ difference, purely due to the cost percentage.
- Low costs are one of the few things you can definitely control.
There is a quiz for this lesson
2 questions that check whether it stuck. They live in the app, because a quiz nobody grades teaches nothing.
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