Calculating the ETF cost?

Question

Let's say I invest 1000 USD in an ETF. Over the 10 year period, the shares had 5% annualized gain, meaning the value of my investment would be 1630 USD. However, I didn't take into account ETF fees.

What would be the value of my investment in the following cases:

1. ETF cost is 0.05 % (un-hedged)?
2. ETF cost is 0.10 % (hedged)?

I am trying to see how much would hedging cost me over this period.

Answer 1

Using a tool like https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php you just compare the values of the expected annualized rate minus the relevant basis point cost in each case and see what the difference is between the two.

Answer 2

Using this Calculator and setting up 3 cases:

1. annualized interest rate = 5% 
2. annualizud interest rate = 5% - 0.05%
3. annualizud interest rate = 5% - 0.10%

The results are (balance):

1. $1,628.89
2. $1,621.15
3. $1,613.45

Earnings $:

2. My gain is $621 and ETF earned $7. 
3. My gain is $613 and ETF earned $15.

Earnings %:

2. Me: 98.77% ETF: 1.23%
3. Me: 97.54% ETF: 2.46%

In this particular case:

ETF 0.05% cost translates to 1.23% of earnings.   
ETF 0.10% cost translates to 2.45% of earnings.

It is important to say that the percentage of earning ETF takes:

• doesn't depend on the amount invested
• increases with the investment time
• decreases with the gain your investment had