A colleague asked me: “It’s only a 1.4% management fee plus custody fee per year. Is it really worth being so stingy?”
I ran the numbers for him. Suppose two funds have the same annualized return before fees—7%:
· Invest 3,000 yuan every month for 30 years, for a total principal of 1.08 million yuan;
· With a total annual fee of 1.4%, you’d end up with about 2.73 million yuan after 30 years;
· With a total annual fee of 0.2%, you’d end up with about 3.4 million yuan after 30 years.
That’s a difference of about 670,000 yuan—nearly 60% of the principal. A 1.2-percentage-point gap in fees, compounded over 30 years, eats up about 20% of your final assets.
Where does the 1.4% come from? After China’s public fund fee reform in 2023, the cap for newly launched actively managed equity funds was set at 1.2% for management fees and 0.2% for custody fees, adding up to exactly 1.4%. Many broad-market index funds charge around 0.15% + 0.05%.
He asked again: “But actively managed funds can outperform the index.” They can—but they’d need to consistently outperform by 1.2 percentage points every year for 30 years just to break even.
Regular investing is all about the long term, and fees take the biggest toll over the long term too. The longer you leave it, the more this hidden leak drains away.
What about you—when buying a fund, do you look at the fees first, or how much it gained last year? Let’s talk in the comments.
(These calculations are illustrative assumptions only. They do not represent the actual returns of any fund and are not investment advice.)
#定投 #基金 #Long-term mindset
I ran the numbers for him. Suppose two funds have the same annualized return before fees—7%:
· Invest 3,000 yuan every month for 30 years, for a total principal of 1.08 million yuan;
· With a total annual fee of 1.4%, you’d end up with about 2.73 million yuan after 30 years;
· With a total annual fee of 0.2%, you’d end up with about 3.4 million yuan after 30 years.
That’s a difference of about 670,000 yuan—nearly 60% of the principal. A 1.2-percentage-point gap in fees, compounded over 30 years, eats up about 20% of your final assets.
Where does the 1.4% come from? After China’s public fund fee reform in 2023, the cap for newly launched actively managed equity funds was set at 1.2% for management fees and 0.2% for custody fees, adding up to exactly 1.4%. Many broad-market index funds charge around 0.15% + 0.05%.
He asked again: “But actively managed funds can outperform the index.” They can—but they’d need to consistently outperform by 1.2 percentage points every year for 30 years just to break even.
Regular investing is all about the long term, and fees take the biggest toll over the long term too. The longer you leave it, the more this hidden leak drains away.
What about you—when buying a fund, do you look at the fees first, or how much it gained last year? Let’s talk in the comments.
(These calculations are illustrative assumptions only. They do not represent the actual returns of any fund and are not investment advice.)
#定投 #基金 #Long-term mindset