Active vs Passive Investing: Fee Comparison and Break-Even Return

This page does two things: (1) shows the break-even excess return implied by the fee difference (under this model), and (2) shows ending values under your assumed active portfolio return.

Break-even excess return equals (active fee − passive fee) under the net = gross − fee model. The dollar consequences depend on balance, horizon, contributions, and the active portfolio return you assume.

Inputs

Starting balance (CAD)

Horizon (years)

Passive portfolio return (%)

Passive fee (%)

Active fee (%)

Active portfolio return (%)

The total annual return you expect from the active strategy before fees.

Annual contribution (CAD)

Results

Inspect the Arithmetic

Break-even alpha (fee diff)

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Break-even active gross return

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Assumed active portfolio return

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Ending value (passive, after fee)

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Ending value (active, after fee, assumed active return)

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Difference (active − passive)

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Ending value (active, at break-even)

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Break-even condition: (r_passive − fee_passive) = (r_active − fee_active) ⇒ r_active = r_passive + (fee_active − fee_passive)

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