1. What is the Managed Fund Formula?

The Managed Fund formula calculates the future value of an investment after accounting for annual returns and management fees. It shows how fees impact long-term investment growth.

2. How Does the Calculator Work?

The calculator uses the Managed Fund formula:

Where:

• \( P \) — Initial principal investment
• \( r \) — Annual return rate (as decimal)
• \( f \) — Annual fee rate (as decimal)
• \( n \) — Number of years invested

Explanation: The formula compounds the net return (return rate minus fee rate) over the investment period.

3. Importance of Fee Calculation

Details: Even small differences in fees can significantly impact long-term returns due to compounding effects. This calculator helps visualize that impact.

4. Using the Calculator

Tips: Enter principal amount in dollars, return and fee rates as decimals (e.g., 0.07 for 7%), and whole number of years. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: How do fees affect long-term returns?
A: Fees reduce the effective return rate, and this reduction compounds over time, potentially costing thousands in lost returns.

Q2: What's a typical fee rate for managed funds?
A: Actively managed funds often charge 0.5%-2% annually, while index funds may charge 0.1%-0.5%.

Q3: Should I always choose the lowest fee option?
A: While fees are important, also consider the fund's strategy, performance history, and your investment goals.

Q4: How does this compare to simple interest?
A: This shows compounding returns, where each year's returns generate additional returns in future years.

Q5: Can I use this for monthly contributions?
A: No, this calculator assumes a single lump sum investment. For regular contributions, a different formula is needed.