Lesson 3 of 5 · 5 min read
Costs & fees
Costs seem small, but over decades they eat significantly into your return. Know what you are paying for.
Types of costs
You often pay: transaction costs (per buy/sell), custody fees (for holding securities), and with funds/ETFs the ongoing charges (TER — an annual percentage). Sometimes there is also a currency or spread cost.
The creeping effect
Suppose you invest for 30 years with a 7% return. 1% extra in costs per year can lower your final amount by 20–25% due to the missed compound interest. Low costs are one of the few things you truly have in your own hands.
You put in $36,000. The other $42,139 is pure compound growth. Time does most of the work.
In practice
€300/month, 30 years, 7% return: at 0.2% costs you end up around €355k, at 1.2% costs around €295k. The same saving behaviour, but €60,000 less — purely leaked away to costs.
Watch the TER
The Total Expense Ratio (TER) is the annual cost percentage of an ETF or fund. Broad index ETFs often have a TER of 0.05–0.25%. Actively managed funds sometimes charge 1.5%+ — a big difference over decades.
Remember this
- You often pay transaction costs, custody fees and, with funds, the ongoing charges (TER).
- 1% extra in costs per year can lower your final amount over 30 years by 20–25%.
- The TER is the annual cost percentage: broad index ETFs 0.05–0.25%, active sometimes 1.5%+.
- Returns are uncertain, costs are not — you keep low costs in your own hands.
There is a quiz for this lesson
3 questions that check whether it stuck. They live in the app, because a quiz nobody grades teaches nothing.
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