DEGIRO cost overview: what is cost drag?

Cost drag is the cumulative effect of ongoing annual costs (transaction costs, currency surcharges and fund costs/TER) on your final wealth; for €10,000 growing for 20 years at a 7% gross return, a cost difference of 0.2% versus 1.5% per year works out to €8,098 less final wealth, or 21.7%.

Why small percentages make a big difference

For €10,000 growing for 20 years at a 7% gross return, a cost difference of 0.2% versus 1.5% per year works out to €8,098 less final wealth: 21.7% less, purely from costs. A difference of 1% in annual costs feels trivial — until you let it compound with your return over 20 years. Cost drag is the term for exactly that effect: the cumulative, compounded loss in final wealth caused by ongoing costs, as opposed to a one-off transaction cost you pay just once.

Which costs count?

Three kinds. No more. When investing via DEGIRO (or any other broker), there are roughly three types of ongoing costs that cause cost drag:

• Transaction costs — per buy or sell, one-off but frequent if you trade actively.
• Currency surcharges — when converting euros to dollars or other currencies, usually a percentage of the amount.
• Fund costs (TER — Total Expense Ratio) — the annual management fee that ETFs and funds automatically deduct from the price. You’ll never see this as a separate charge, but it reduces the fund’s return anew every year.

Of these three, TER is usually the biggest silent killer, precisely because it’s invisible: nothing is deducted from your account, the fund’s price is simply a fraction lower every single day than it would be without that cost.

In practice we often see people put a 0.07% TER ETF next to a 1.2% TER active fund and think “that’s basically the same” — until they run the numbers over 20 years. A higher TER is rarely worth it for a plain global index tracker; for a niche strategy you can’t get any cheaper elsewhere, it can be a different story.

Worked example: the difference between 0.2% and 1.5% in annual costs

Suppose you invest €10,000 once for 20 years at a gross return of 7% per year, without adding any more money.

With low costs (0.2% per year, net 6.8%):

€10,000 × (1.068)^20 ≈ €37,276

With higher costs (1.5% per year, net 5.5%):

€10,000 × (1.055)^20 ≈ €29,178

The difference: €8,098, or 21.7% less final wealth — purely from 1.3 percentage points of extra annual cost. The gross return was identical in both cases; only the costs differed.

Rule of thumb: over a period of 20 to 30 years, every extra 0.1 percentage point of annual cost eats up roughly 2 to 3% of your final wealth. At a 1.3 percentage point difference, that naturally adds up to well over 20% — exactly what the worked example above shows.

Assumption: a one-off contribution of €10,000 at 7% gross return per year, with no further deposits.

Why this is hard to see in a standard overview

A standard portfolio overview shows your value and your return, but rarely breaks down how much of the difference between “what the market did” and “what you kept” is attributable to costs. That’s the problem. Without that breakdown, it’s impossible to judge whether a more expensive fund’s higher TER is worth it, or whether frequent trading is quietly eating your return. How often you trade is measured by your portfolio turnover ratio.

How ClearAnalyser calculates this for you

ClearAnalyser cumulatively tracks how much transaction costs, currency surcharges and fund costs have cost your portfolio since the start, and sets that against your total wealth build-up — so cost drag stops being an invisible deduction and becomes a concrete number you can weigh alongside your return after costs. Which other tools show costs is listed in the DEGIRO portfolio tracker comparison.

Sources: AFM — information on the costs of investing (Dutch) · Morningstar research on the long-term impact of fund costs (TER) on investors’ final wealth.