Investment Fees: What Brokerage, ETF and Account Costs Take From Your Returns Over 20 Years

When people talk about performance, they almost always look at the gross return: "this fund gained 6% a year." They forget to ask what is left once fees have been deducted. Fees have one distinctive feature: they are certain, whereas returns are not. A market can fall, stall or rise; fees are charged in every case, year after year. This article reviews the 3 main families of fees, explains why time amplifies their effect, and offers an illustrative worked example showing the gap that 2 different fee levels can open up over 20 years.

The 3 Families of Fees to Know

The costs borne by an individual investor fall into 3 categories, and they add up.

Brokerage fees: charged on every buy or sell order executed through your broker. They take the form of a fixed amount (for example €1 or €5 per order), a percentage of the amount traded, or a mix of both, often with a minimum.
Fund and ETF management fees: expressed as an annual percentage of assets, known as the ongoing charges figure or expense ratio (TER). They are deducted automatically from the fund's value and never appear as a separate line on your statement.
Account (wrapper) fees: the costs of the account that holds your securities, such as account maintenance fees, contract management fees or fees on deposits. Their level varies widely from one provider to another. To compare account types on substance, our lesson PEA, CTO, life insurance: which account to choose details their differences (the PEA is a French equity savings plan).

Less visible costs are sometimes added on top, such as the gap between the buying and selling price (the spread) or currency conversion fees when buying in a foreign currency.

Why a Small Percentage Weighs So Much

An annual fee of 1% looks insignificant. It is much less so once you understand the mechanism: fees do not only remove 1% of your capital, they also remove everything that 1% would have earned in the following years. This is compounding, but in reverse. Our lesson on compound interest explains why time amplifies whatever is left to work; it amplifies what is taken out in just the same way.

2 other points deserve attention:

Fees apply to the capital, not to the gain. In a year when the market falls 10%, you still pay management fees on the whole amount invested.
The gap widens non-linearly. After 5 years the difference is discreet. After 20 or 30 years, it becomes one of the most visible factors in the final result.

Worked Example: 2 Fee Levels Over 20 Years

Here is a purely illustrative example. The figures are chosen to show a mechanism; they describe no real product and are not a forecast. Assumptions: an initial capital of €10,000, no additional deposits, and a constant gross return of 6% a year before fees, over 20 years.

Annual fees	Net return	Capital after 20 years	Gap versus the lowest fee level
0.2%	5.8%	about €30,900	–
1%	5%	about €26,500	about €4,400
2%	4%	about €21,900	about €9,000

Under these assumptions, moving from 0.2% to 2% in annual fees costs about €9,000 on €10,000 invested, close to 30% of the final capital. Yet the investment "earned" 6% a year before fees in all 3 cases. In reality, returns are never constant, and past performance does not predict future results; the example only shows how a difference of a few tenths of a percentage point, repeated every year, turns into a gap of several thousand euros.

How Brokerage Fees Depend on Order Frequency

Brokerage fees look small per order, but what matters is their size relative to the amount invested. Take an illustrative example: an investor who puts in €200 a month.

With a fee of €10 per order, each deposit loses 5% on purchase.
With a fee of €1 per order, the loss falls to 0.5%.
With a proportional fee of 0.1% and a minimum of €1, the minimum applies: also 0.5%.

On small amounts, a high fixed fee can therefore cost more than an annual management fee. Conversely, an investor who trades frequently accumulates brokerage fees even when each is modest: 50 orders at €2 amount to €100 a year, whatever the outcome. The number of orders is thus a cost lever in its own right, as our article on how to calculate portfolio performance also explains.

How to Spot the Fees You Actually Pay

Fees are rarely presented in a unified way. Here is a simple approach to identify them:

Note your broker's fee schedule (fixed amount, percentage, minimum) and count the orders you place per year.
Read the ongoing charges of each ETF or fund you hold in its key information document. They are expressed as an annual percentage.
Add up the account fees: maintenance, contract management, any fees on deposits.
Estimate a total annual cost as a percentage of your portfolio. This figure, rather than each fee taken in isolation, is what you compare to returns.

A more expensive fund is not necessarily a poor choice: it may offer a specific exposure, a different management style or access to a market that is hard to reach otherwise. The useful question is not "are the fees high?" but "what do I receive in return, and is it comparable to what exists elsewhere?"

Fees, Risk and Diversification: Not Everything Comes Down to One Number

Cutting fees should not lead you to neglect everything else. A very cheap portfolio concentrated in a few stocks remains exposed to high risk, which fees do not measure. Fees are one of the parameters an investor keeps control over, unlike market returns; they do not replace risk analysis. To go further, the lesson Risk and return explains why the 2 are read together. To see how your own portfolio is spread, you can also use the PEA diversification score tool.

Key Takeaways

There are 3 families of fees: brokerage, fund and ETF management, and the account. They add up.
Fees are certain and charged every year; returns are uncertain.
In the illustrative example above, 2% in annual fees instead of 0.2% reduces the final capital by about 30% over 20 years.
On small regular deposits, the brokerage fee per order can weigh as much as management fees.
The right indicator is the total annual cost expressed as a percentage of the portfolio, compared with what each product actually provides.

This article is for information and education only and does not constitute personalised investment advice. Past performance does not predict future results.