Index Fund vs ETF Calculator: Which Grows More in 20 Years?

What does $481.26 mean?

It means the ETF ends $481.26 ahead of the index fund on the same $10,000, at the same 7% gross return, over the same 20 years — $38,461.19 against $37,979.93. The index fund future value, the ETF future value and the gap are three outputs, never the same number: the fund is what the index fund grows to, the ETF is what the ETF grows to, and the gap is how far apart they end. The difference is two small numbers pulling in opposite directions: the ETF pays a 0.05% spread once, which costs $5.00, and saves 0.07% a year on the expense ratio, which is worth $486.26 over 20 years — $486.26 minus $5.00 is $481.26.

Three things to check before you trust the number

The expense ratio is the whole race. The gross return is the same for both, so the winner is the one that keeps more of it: the fund keeps 6.90% a year and the ETF keeps 6.97% a year, and over 20 years that 0.07% a year is $481.26. Check both expense ratios against the fund factsheets before you trust the winner.

The spread is a one-time cost, not a yearly one. The ETF pays the bid-ask spread once, when you buy it — $5.00 on $10,000 at 0.05% — and never again. A wide spread on a thinly traded ETF can cost more than a year of fee savings, so check the spread on the ETF you actually buy.

Time is what makes the gap. After 1 year the gap is $1.65; after 10 years it is $118.18; after 20 years it is $481.26; after 30 years it is $1,430.18. A short horizon favours the fund, because the spread has no time to be earned back, and a long horizon favours the ETF.

Worked example

On the defaults: $10,000 at 7% a year for 20 years, fund expense ratio 0.10%, ETF expense ratio 0.03%, spread 0.05%.

1. Index fund net return: 7% − 0.10% = 6.90% a year.
2. ETF net return: 7% − 0.03% = 6.97% a year.
3. Index fund future value: $10,000 × 1.069²⁰ = $37,979.93 (unrounded 37979.925121).
4. ETF starting point: $10,000 × (1 − 0.05%) = $9,995.00 after the spread.
5. ETF future value: $9,995.00 × 1.0697²⁰ = $38,461.19 (unrounded 38461.189755).
6. Gap: $38,461.19 − $37,979.93 = $481.26 (unrounded 481.264634) — the ETF wins.
7. Largest spread for the ETF to win in 1 year: 0.06% — at 0.06% the ETF wins by $0.58, and at 0.07% the index fund wins by $0.49.
8. Smallest years for a $100 gap: 10 years — at 10 years the gap is $118.18, and at 9 years it is $98.55.

Every branch, checked

• 10 years: 10 years: Index fund $19,488.44; ETF $19,606.62; ETF wins by $118.18. 10 years — fund $19,488.44, ETF $19,606.62, ETF wins by $118.18 — half the time, a quarter of the gap.
• 30 years: 30 years: Index fund $74,016.95; ETF $75,447.12; ETF wins by $1,430.18. 30 years — fund $74,016.95, ETF $75,447.12, ETF wins by $1,430.18 — the gap triples from 20 to 30 years.
• 5% return: 5% return: Index fund $26,032.13; ETF $26,368.58; ETF wins by $336.45. A 5% return — fund $26,032.13, ETF $26,368.58, ETF wins by $336.45.
• 10% return: 10% return: Index fund $66,062.32; ETF $66,875.54; ETF wins by $813.22. A 10% return — fund $66,062.32, ETF $66,875.54, ETF wins by $813.22.
• $50,000 lump sum: $50,000 lump sum: Index fund $189,899.63; ETF $192,305.95; ETF wins by $2,406.32. A $50,000 lump sum — fund $189,899.63, ETF $192,305.95, ETF wins by $2,406.32 — the gap scales with the lump sum.
• $1,000 lump sum: $1,000 lump sum: Index fund $3,797.99; ETF $3,846.12; ETF wins by $48.13. A $1,000 lump sum — fund $3,797.99, ETF $3,846.12, ETF wins by $48.13.
• 0.20% fund expense ratio: 0.20% fund expense ratio: Index fund $37,275.64; ETF $38,461.19; ETF wins by $1,185.55. A 0.20% fund expense ratio — fund $37,275.64, ETF $38,461.19, ETF wins by $1,185.55 — a dearer fund widens the gap.
• 0.03% fund expense ratio: 0.03% fund expense ratio: Index fund $38,480.43; ETF $38,461.19; Index fund wins by $19.24. A 0.03% fund expense ratio, the same as the ETF — fund $38,480.43, ETF $38,461.19, the index fund wins by $19.24 — with equal expense ratios the spread decides it.
• 0.20% spread: 0.20% spread: Index fund $37,979.93; ETF $38,403.47; ETF wins by $423.54. A 0.20% spread — fund $37,979.93, ETF $38,403.47, ETF wins by $423.54 — a wider spread costs $57.72 of the advantage.
• 1 year: 1 year: Index fund $10,690.00; ETF $10,691.65; ETF wins by $1.65. 1 year — fund $10,690.00, ETF $10,691.65, ETF wins by $1.65 — the spread nearly eats the whole first year.

The reverses, worked backwards

• Largest spread for the ETF to win in 1 year: 0.06% — at 0.06% the figures are Index fund $10,690.00 (unrounded 10690.000000); ETF $10,690.58 (unrounded 10690.581800); ETF wins by $0.58 (unrounded 0.581800); at the lower neighbor the figures are Index fund $10,690.00 (unrounded 10690.000000); ETF $10,689.51 (unrounded 10689.512100); Index fund wins by $0.49 (unrounded 0.487900); at the upper neighbor the figures are Index fund $10,690.00 (unrounded 10690.000000); ETF $10,691.65 (unrounded 10691.651500); ETF wins by $1.65 (unrounded 1.651500) — verdict: STEP.
• Smallest years for the ETF advantage to REACH at least $100: 10 years — at 10 years the figures are Index fund $19,488.44 (unrounded 19488.438912); ETF $19,606.62 (unrounded 19606.621116); ETF wins by $118.18 (unrounded 118.182205); at the lower neighbor the figures are Index fund $18,230.53 (unrounded 18230.532191); ETF $18,329.08 (unrounded 18329.083964); ETF wins by $98.55 (unrounded 98.551774); at the upper neighbor the figures are Index fund $20,833.14 (unrounded 20833.141197); ETF $20,973.20 (unrounded 20973.202608); ETF wins by $140.06 (unrounded 140.061412) — verdict: STEP.
• Smallest fund expense ratio for the ETF to win in 20 years: 0.04% — at 0.04% the figures are Index fund $38,408.55 (unrounded 38408.547620); ETF $38,461.19 (unrounded 38461.189755); ETF wins by $52.64 (unrounded 52.642135); at the lower neighbor the figures are Index fund $38,480.43 (unrounded 38480.429970); ETF $38,461.19 (unrounded 38461.189755); Index fund wins by $19.24 (unrounded 19.240215); at the upper neighbor the figures are Index fund $38,336.79 (unrounded 38336.792847); ETF $38,461.19 (unrounded 38461.189755); ETF wins by $124.40 (unrounded 124.396908) — verdict: STEP.
• Largest ETF expense ratio for the ETF to still win in 20 years: 0.09% — at 0.09% the figures are Index fund $37,979.93 (unrounded 37979.925121); ETF $38,032.02 (unrounded 38032.019704); ETF wins by $52.09 (unrounded 52.094582); at the lower neighbor the figures are Index fund $37,979.93 (unrounded 37979.925121); ETF $37,960.94 (unrounded 37960.935159); Index fund wins by $18.99 (unrounded 18.989963); at the upper neighbor the figures are Index fund $37,979.93 (unrounded 37979.925121); ETF $38,103.23 (unrounded 38103.230692); ETF wins by $123.31 (unrounded 123.305571) — verdict: STEP.
• Smallest lump sum for the ETF advantage to REACH at least $100 in 20 years: $2,100 — at $2,100 the figures are Index fund $7,975.78 (unrounded 7975.784275); ETF $8,076.85 (unrounded 8076.849849); ETF wins by $101.07 (unrounded 101.065573); at the lower neighbor the figures are Index fund $7,595.99 (unrounded 7595.985024); ETF $7,692.24 (unrounded 7692.237951); ETF wins by $96.25 (unrounded 96.252927); at the upper neighbor the figures are Index fund $8,355.58 (unrounded 8355.583527); ETF $8,461.46 (unrounded 8461.461746); ETF wins by $105.88 (unrounded 105.878219) — verdict: STEP.
• Smallest years for the ETF to beat the fund with a 0.50% spread: 8 years — at 8 years the figures are Index fund $17,053.82 (unrounded 17053.818700); ETF $17,057.64 (unrounded 17057.644036); ETF wins by $3.83 (unrounded 3.825336); at the lower neighbor the figures are Index fund $15,953.06 (unrounded 15953.057718); ETF $15,946.19 (unrounded 15946.194294); Index fund wins by $6.86 (unrounded 6.863424); at the upper neighbor the figures are Index fund $18,230.53 (unrounded 18230.532191); ETF $18,246.56 (unrounded 18246.561825); ETF wins by $16.03 (unrounded 16.029635) — verdict: STEP.

What the defaults assume

The defaults are $10,000 at 7% a year for 20 years — a long, plain buy-and-hold — with a 0.10% index fund and a 0.03% ETF, the two cheapest wrappers you can buy, and a 0.05% spread, a liquid ETF’s usual cost. They are a starting point, not a benchmark: your return may be lower, your horizon may be shorter, and your ETF may trade wider. Change the six numbers to your own and the calculator recomputes instantly. The expense ratio is the whole race — check both against the factsheets before you trust the winner.

These notes repeat in every explainer section because this page is built to be read start to finish: the defaults are one lump sum, not a standard; the expense ratio is the whole race; the spread is a one-time cost, not a yearly one; and time is what makes the gap.

Output · formula · meaning

Who uses this

• An investor choosing between an index fund and an ETF for the same index — $10,000 at 7% for 20 years ends $481.26 apart, and the calculator shows why.
• A saver with a short horizon — 1 year is nearly a tie, $1.65, because the spread has no time to be earned back.
• A retiree comparing fees over 30 years — the gap triples from 20 to 30 years, to $1,430.18.
• A beginner learning what an expense ratio costs — 0.07% a year sounds like nothing, and over 20 years it is $486.26.

Accuracy & limitations

The calculator does the arithmetic exactly — the index fund grows at the return minus its expense ratio, the ETF grows at the return minus its expense ratio from a starting point reduced by the spread, and the gap is the difference — and every figure on this page is checked against an independent model. What it cannot do is predict the return: 7% a year is an assumption, not a promise, and the real return varies year to year. It also leaves out taxes, trading commissions and the bid-ask spread on selling, and it assumes the expense ratios never change. And the gap is $490.04, unrounded 490.042896, on fractional inputs — the page prints the unrounded figure so the rounding does not mislead you. This page compares two wrappers for the same index; it is not investment advice.

Cite this calculator

Index fund future value = lump sum × (1 + return − fund expense ratio)^years; ETF future value = lump sum × (1 − spread) × (1 + return − ETF expense ratio)^years. On the defaults — $10,000 at 7% for 20 years, fund 0.10%, ETF 0.03%, spread 0.05% — the index fund grows to $37,979.93 and the ETF grows to $38,461.19, so the ETF wins by $481.26. Largest spread for the ETF to win in 1 year: 0.06%. Smallest years for the ETF advantage to reach at least $100: 10 years. Smallest fund expense ratio for the ETF to win in 20 years: 0.04%. Largest ETF expense ratio for the ETF to still win in 20 years: 0.09%. Smallest lump sum for the ETF advantage to reach at least $100 in 20 years: $2,100. Smallest years for the ETF to beat the fund with a 0.50% spread: 8 years. Source: Bright Side Kit, brightoolbox.com.

Frequently asked questions