What the mutual fund calculator shows
A mutual fund pools money from many investors and invests it in stocks, bonds or other assets. Its return reaches you only after its costs: sales charges when you buy or sell, and operating expenses taken every year. This mutual fund calculator estimates the ending value of your investment, the net return after all costs and the internal rate of return (IRR), with a year-by-year schedule.
How the calculator works
- Sales charge: each deposit D goes into the fund as D × (1 − load).
- Growth after expenses: the balance grows at (1 + return − expense ratio)1/12 − 1 a month.
- Deferred sales charge: total money put in × the deferred charge, taken when you sell.
- Net IRR: the yearly rate at which every deposit, on its date, grows to the ending value.
Example
$20,000 plus $1,000 a month for 5 years, at a 5% return with a 2% sales charge and 0.5% operating expenses, grows to $90,077.09. You put in $80,000, so the net return is $10,077.09. The sales charge takes $1,600.00 and the operating expenses $1,323.40, $2,923.40 in all. The net IRR is 3.844% a year instead of 5%.
What a sales load costs
The same example with different front-end loads:
| Sales charge | Ending value | Charges | Net IRR |
|---|---|---|---|
| 0% | $91,915.40 | $1,350.41 | 4.500% |
| 2% | $90,077.09 | $2,923.40 | 3.844% |
| 5.75% | $86,630.26 | $5,872.76 | 2.577% |
A 5% deferred sales charge instead of a front-end load costs $4,000.00 when you sell and leaves $87,915.40. Many funds lower the front-end load for large purchases, at breakpoints such as $25,000 or $50,000.
How the expense ratio adds up
$20,000 plus $1,000 a month at a 5% return, with no sales charge:
| Expense ratio | 10 years | 20 years | 30 years |
|---|---|---|---|
| 0.05% | $186,393 | $456,141 | $893,444 |
| 0.5% | $181,535 | $432,394 | $821,970 |
| 1% | $176,301 | $407,664 | $750,139 |
| 1.5% | $171,233 | $384,562 | $685,484 |
After 30 years, a 1.5% fund leaves $207,960 less than a 0.05% index fund. The expense ratio already includes the 12b-1 marketing fee, if the fund charges one.
Mutual fund share classes
- Class A: a front-end sales charge, often with breakpoints, and lower yearly expenses.
- Class B: no front-end charge, but a deferred charge that falls each year you hold the fund.
- Class C: a level charge built into higher yearly expenses, often with a small deferred charge in the first year.
- No-load funds: no sales charges at all, often bought directly from the fund company or a broker.
Net IRR and other returns
The net IRR is the yearly return you actually earn on each dollar for the time it was invested, after all charges and fees. It lets you compare funds with different fees, and it is usually well below the fund's stated return. To find the return of an account from its real deposits and withdrawals, use the average return calculator or the IRR calculator. For an investment without fees, the investment calculator finds the end balance, the contribution or the time to a goal.
Taxes
In a taxable account, the dividends and capital gains a fund pays out are taxed each year, even when they are reinvested, and you pay tax on any gain when you sell. In a 401(k) or an IRA they grow tax-deferred, and in a Roth IRA tax-free. The calculator does not include taxes.