# Every layer of cost: fee, spread, FX, platform, tax drag > Follow 1,000 dollars through every cost of owning a fund and add them up all-in. - Course: [Long-Term Investing: Index Funds, Risk and Your Own Behavior](https://productovi.com/courses/long-term-investing.md) - Module: What does a fund really cost? - Lesson 17/32, ~22 min - Source: https://productovi.com/courses/long-term-investing/every-layer-of-cost ## The 0.2% on the landing page **Alex Tutor:** June 2027 at Zapas. Five months after you joined as PM, the beta is busy and the public launch is still set for November. Today's topic is money that quietly disappears. **Ethan:** Our world fund costs 0.2% a year. I want "Fees from 0.2%" in big letters on the landing page. Nobody else in the market can say that. **Grace:** 0.2% is the fund's ongoing charge. It's one layer of several. Let's follow one user's \$1,000 through a single year and count every dollar that leaves. **Grace:** To keep it clean, assume the market is flat: 0% for the year. Then only costs move the money. Here are the seven layers our user meets. **Dataset (CSV):** [One user's \$1,000 for one flat year: every cost layer](https://productovi.com/datasets/long-term-investing/every-layer-of-cost/cost_layers.csv) Synthetic Zapas example. Each layer is charged on the 1,000 dollars; `when` = deposit (once on the way in), yearly, or withdrawal (once on the way out). **Cost of each layer on \$1,000, first year** | Layer | Cost | | --- | --- | | 1 FX on deposit | 10 | | 2 buy spread | 1 | | 3 fund fee | 2 | | 4 platform fee | 3 | | 5 tax drag | 3 | | 6 sell spread | 1 | | 7 FX on withdrawal | 10 | *Layers in the order the money meets them. Synthetic data.* > **Exercise:** One user puts \$1,000 into the Zapas world fund for one year in a flat market. Costs: FX on deposit \$10, buy spread \$1, fund fee \$2, platform fee \$3, tax drag \$3, sell spread \$1, FX on withdrawal \$10. How many dollars do all the layers cost in total? **Sofia:** Wait, the two conversions alone are \$20? That's ten times the fund fee. **Grace:** Right. Our users earn and spend hryvnias, so the money crosses the currency border twice: in and out. At 1% each way, that's the biggest layer by far. **Sofia:** And the spread? Where does that dollar go? **Grace:** To whoever stands ready to buy and sell the fund's shares. The buy price sits a little above the middle, the sell price a little below. You pay half the gap going in and half coming out: 0.1% each way here. ![In a flat year 1,000 dollars lose 11 on the way in, 8 inside the fund and 11 on the way out; the two currency conversions are 20 of the 30 dollars, the fund fee only 2.](https://productovi.com/courses/long-term-investing/diagrams/m5-l1-cost-journey.png) *Most of the cost sits at the doors, not inside the fund.* > **Exercise:** In one flat year a user's \$1,000 meets \$30 of costs in total. The two currency conversions (UAH to USD on deposit, USD to UAH on withdrawal) cost \$10 each. What share of all costs are the two conversions, in %? **Ethan:** But the conversions happen once. The fund fee is every year. Over time the fee should win, no? **Grace:** That's the right question. Split the layers by when they hit: some are paid once, some every year. Then hold the money for ten years and see what is left. > **Exercise:** Which of these layers are paid only once, on the way in or out, so their share of the cost shrinks the longer the user stays invested? Select all that apply. **Grace:** Now ten years. The yearly layers are taken from what's left each year, the one-off ones at the start and the end. Still a flat market. > **Exercise:** A user keeps \$1,000 for ten years in a flat market (0% a year). On the way in: 1% conversion and 0.1% spread. Every year: 0.2% fund fee, 0.3% platform fee and 0.3% tax drag, taken from what is left. On the way out: 0.1% spread and 1% conversion. How many dollars are left at the end? Round to cents. **Ethan:** Almost ten percent gone in a decade where nothing happened? That's a scary number to show users. **Grace:** Hiding it is scarier. And look at what drove it: the doors, the platform and the tax, not the 0.2%. That's where we can actually compete. **Sofia:** If we got conversion down to 0.5% each way, would users save more than if the fund fee went to zero? **Grace:** For anyone holding under five years, yes: \$10 saved once against \$2 a year. Over longer holds the yearly layers catch up. That's exactly why we count both kinds. **Sofia:** So "fees from 0.2%" is technically true and practically useless. What do we put on the landing page instead? **Grace:** Something a user can check against a bank's offer: one all-in number for a typical case, and the layers behind it. > **Exercise:** Which line should go on the Zapas landing page? > **Exercise:** For a user who holds \$1,000 for one year, the fund's ongoing charge is the largest cost layer. **Ethan:** Fine. Write me the cost line for the fund screen, short enough that a user actually reads it. > **Exercise:** Write the cost note for the Zapas world fund screen (2–3 sentences). Use the example: on \$1,000, \$22 of one-off costs (two 1% conversions and two 0.1% spread halves) and \$8 a year of yearly costs (0.2% fund fee, 0.3% platform fee, 0.3% tax drag). Make it honest and comparable with other offers. **Grace:** Good. Next I want to see what 0.8% a year does to a monthly plan over thirty or forty years. Small percentages get large with time. > **Key ideas** > > - The fund's ongoing charge is one layer of several: conversion, spread, fund fee, platform fee and tax drag. > - In the example a flat year costs \$30 on \$1,000 (3.0%); the two conversions are \$20 (66.7%), the fund fee \$2 (6.7%). > - Split costs into one-off (\$22) and yearly (\$8). Yearly costs compound: ten flat years leave \$902.63. > - Compare products all-in, never one layer against one layer. > **Educational, not advice** > > This lesson explains how investing works; it doesn't tell you what to buy. Investments can fall and you can get back less than you put in. Check the current rules where you live or ask a licensed professional. - Previous lesson: [Case: "star manager picks" and a "hot theme" tab](https://productovi.com/courses/long-term-investing/case-star-picks.md) - Next lesson: [What 0.2% vs 1.5% does over 10 to 40 years](https://productovi.com/courses/long-term-investing/fee-drag-decades.md) --- Productovi Learning. Free, no sign-up needed to read.