How does one investor end up $28,194 ahead?

You'd think that two investors who invest the same amount, for the same time, and earn the same return before expenses, would end up at the same place.

But when their funds' expense ratios aren't the same, a small difference makes a big difference. In this hypothetical comparison, one fund has an expense ratio of 1.3%. The other, 0.3%. Applied to an initial investment of $5,000, with subsequent annual investments of $5,000 returning 8% before expenses and compounded over 20 years, the difference adds up to $28,194.

How high costs affect returns

Note: This hypothetical example does not represent any particular investment.

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