This week we'll take a look at the impact of mutual fund expenses (fees). We will compare two funds that have IDENTICAL holdings (the largest 500 US corporations) but differ in the amount of fees they charge their investors (you, in this case). Suppose you can chose to invest in either one of them.

1. Compare the expenses on two mutual funds that follow the same index: S&P 500. The first fund is PEOPX (BNY Mellon S&P 500 Index) and it's expense ratio is 0.5% per year. The second fund is VFIAX (Vanguard S&P 500 Index) with an expense ratio of 0.05% per year (10 times less).
2. Assume that both funds will return 10% per year until YOUR retirement (you will have your own number of years here) and that you will invest $5,000 per year (EVERY YEAR) starting at year-end all the way until you retire.
3. Calculate the difference in future values for PEOPX and VFIAX at your retirement age (Hint: subtract the annual expense ratio from the annual return and use the difference to compute future value of your contributions). Use "FV" function in Excel.Future Value Function - Excel 2013 (Links to an external site.)
4. Find a comparable item (an iPhone, a TV set, a car (which model?) etc.) that most closely represents this difference.