Key takeaways
- The SEC’s example: on a $100,000 investment growing 4% a year, a 0.25% annual fee leaves about $208,000 after 20 years, while a 1% fee leaves about $179,000. That’s roughly $29,000 less.
- Fees “may seem small, but over time they can have a major impact,” because they reduce the money that is earning a return.
- Some fund fees are taken out of the fund’s assets, so you never get a bill for them.
- Bank fees add up too. The CFPB says many banks charge $30 or more for each overdraft.
This article is general information based on SEC and CFPB guidance. It is not personal financial advice. The investment figures are the SEC’s hypothetical examples, not predictions.
Why small fees matter
Investing and banking both cost money. The SEC’s Office of Investor Education says fees and expenses “reduce the amount of money in your investment portfolio earning a return.” In other words, a fee takes your money now and also takes the growth that money would have earned.
The SEC’s $100,000 example
The SEC compared three annual fee levels on a hypothetical $100,000 investment that grows 4% a year for 20 years:
| Annual fee | Approximate value after 20 years |
|---|---|
| 0.25% | $208,000 |
| 0.50% | $198,000 |
| 1.00% | $179,000 |
The gap between the lowest and highest fee is about $29,000 (our subtraction from the SEC’s rounded figures). The SEC’s conclusion: “When choosing an investment professional or an investment, be sure you understand and compare the fees you’ll be charged. It could save you a lot of money in the long run.”
Two kinds of investment fees
The SEC says fees typically come in two types, and both reduce your portfolio.
Transaction fees are charged each time you buy, sell or exchange an investment. Examples:
- Commissions when you buy or sell through an investment professional.
- Markups and markdowns, where a broker-dealer sells you a security at a price above the market price, or buys it from you below the market price.
- Sales loads, which some mutual funds charge to pay the person who sold you the fund. They can be paid when you invest (front-end) or when you sell (back-end).
- Surrender charges if you withdraw early from a variable annuity.
Ongoing fees are charged regularly, even if you don’t trade. Examples:
- Advisory fees, an annual fee based on the value of your portfolio if an adviser manages it.
- Annual fund operating expenses, often called the expense ratio. The SEC says these are “deducted from the fund’s assets and therefore lower your investment returns,” so they are indirect fees.
- Retirement plan fees, such as for a 401(k) or 403(b), on top of the funds’ own expenses.
- Variable annuity fees, including insurance charges and optional features.
Fees you might not notice
The SEC also lists “other fees that are not obvious to you.” Broker-dealers may charge fees for use of trading platforms, account maintenance, account inactivity, not keeping a minimum balance, account transfers, account closing and wire transfers, and “these fees may not always be obvious to you from your account statement.”
How to find out what you’re paying
The SEC suggests reading these documents:
- For an investment professional’s fees: account opening documents, Form CRS (a short customer relationship summary), fee schedules, and your account statements and trade confirmations. Advisory clients can also read Form ADV.
- For a fund’s fees: the prospectus, which has a standardized table of fees and expenses, and shareholder reports.
Then ask. The SEC suggests questions such as: Is this a brokerage or advisory account? What fees will I pay, directly or indirectly? Is there a fee schedule? How can I reduce or eliminate some of the fees? Do I need a minimum balance? You can look up a firm’s Form CRS on Investor.gov/CRS.
Bank fees: the overdraft example
The CFPB, the US consumer finance agency, explains that an overdraft happens when you don’t have enough money to cover a transaction and the bank pays it anyway, then charges you back plus a fee. It says:
- “Many banks and credit unions charge $30 or more per transaction,” and you could be charged multiple overdraft fees in one day.
- Many also charge an extra fee if you don’t repay the shortfall within a few days.
- Institutions can’t charge you for overdrafts on ATM and debit card transactions unless you’ve opted in.
The CFPB says there may be steps to reduce or eliminate overdraft fees: opt out of debit and ATM overdraft coverage (your card is generally declined instead), link your checking account to a savings account (a transfer fee is usually less than an overdraft fee), or ask about a line of credit. Its tips to avoid overdrafts include tracking your balance, setting up low-balance alerts, and knowing when automatic payments and deposits will land.
A five-minute fee check
- Find the expense ratio of each fund you own in its prospectus or shareholder report
- Read the fee schedule for your brokerage, adviser or retirement plan
- Look up the firm’s Form CRS
- Check your bank’s overdraft and monthly fees, and whether you’ve opted in to overdraft coverage
- Ask what you can do to lower any fee you don’t understand
See also our guide to old-fashioned money habits.
Frequently asked questions
How much can a small fee cost? In the SEC’s example, a 1% annual fee instead of 0.25% means about $29,000 less after 20 years on $100,000 growing 4% a year.
What is an expense ratio? The yearly cost of running a fund, as a percentage of its assets. It’s deducted from the fund’s assets, so you don’t receive a separate bill.
How do I find a fund’s fees? In the fee table of its prospectus.
Can I avoid overdraft fees? The CFPB says you can opt out of debit and ATM overdraft coverage, link a savings account, or ask about a line of credit.
Information checked on: November 13, 2026. Fees and rules change, so check with your provider.
Sources
- SEC Office of Investor Education and Assistance, “How Fees and Expenses Affect Your Investment Portfolio,” Investor Bulletin (July 23, 2025), investor.gov
- Consumer Financial Protection Bureau, “Know your overdraft options” (page last modified June 4, 2025)
Money note: this article is for general information and is not financial advice.
