Investment Fees – Expense Ratios Matter!

Published on June 21, 2021

Latest clips top searched Premium Funds, UK Bonds, Bond Basics, and Do Individual Bonds Have Expense Ratios, Investment Fees – Expense Ratios Matter!.

Don’t make this $200,000 mistake some people make! I explain why keeping your fees (expense ratios) low is one element that is critical to your success as an investor, why roboadvisors may not be as good of a deal as you think, and how you can minimize fees!

Introduction to Investing video series:

A 0.5% fee from a robo advisor can seem small, but it’s a big deal! This is because of something Einstein called the 8th wonder of the world. That is compound interest. I made another video detailing compound interest, and you should watch it. If you take that extra money you save in fees and reinvest it for 40 years it turns into a lot of money.

Let’s say you start with 25k and have a 40 year investment horizon. Each month you invest an additional $500. Let’s say your annual rate of return is 7.2%, which is the historic inflation adjusted return of the S&P 500. We will compare 0.04% fee, a 0.5% fee typical of some robo advisors, and 1% fee which is typical for a financial advisor or higher cost mutual funds. The difference in results is massive, with the same amount of money getting the same return. While that 0.5% fee or 1% fee may seem insignificant, the 0.5% fee compounds into an additional 210k in fees, and the 1% fee compounds into an additional 407k fee. The 0.5% fee would eat up roughly 15% of your total return, and 1% fee would eat up a whopping 28.5% of your total return!

The fees you pay as an investor can take many forms:
Advisor or asset-based fees: This is typically where you are charged a % of your investments each year usually around 0.5 – 1%.
– Loads: these are fees charged when you initially put money in the investment or remove money. These can often be as high as 6% of your initial investment, so you immediately start out at a 6% loss.
– Commissions: Loads are often used to pay for commissions. There are other types of commissions that may get charged. Often investment advisors will make money based on commissions instead of charging a yearly fee.
– Actively managed funds: Many advisors will put you in actively managed funds. These funds have professional investment managers deciding how to invest your money. They typically do worse than index funds, but charge significantly higher fees.
– Turnover: This is how often the fund is buying or selling its assets. The higher the turnover the higher the hidden costs of trading, sitting in cash, and other hidden fees there are.

These are just a few of the types of fees that can eat your returns. The full list is too long to cover in this video. They can easily add up to over 1%.

Jack Bogle was very successful in his mission. He famously said “In investing, you get what you don’t pay for.” His firm Vanguard is now one of the largest asset managers in the world, and has been taking over the industry with it’s low cost index funds. Vanguard has consistently become more efficient and lowered the costs of it’s funds over time, to where many are now at or below 0.07% fee.

How do these indexes work? They simply track the entire market. If you invest in Vanguard’s Total US Stock Market Index fund (VTSAX or VTI), it invests in over 3500 companies in the US. The Total International Stock Index holds (VTIAX or VXUS) over 7300 companies. And the total US bond index (VBTLX or BND) holds nearly 10000 bonds. When you buy the index, you are basically buying the whole market.

Often the robo advisors hold index funds, so your return will still be pretty good. However, they are charging this extra fee to manage your portfolio for you. They often perform things like tax loss harvesting re-balancing, etc. However, I don’t think this is worth an extra fees. My video on asset allocation explained how you can build a great investment portfolio yourself by holding just 3 index funds.

Investing some of your time into learning how to manage your money yourself can save you hundreds of thousands of dollars in fees.

Do Individual Bonds Have Expense Ratios

Do Individual Bonds Have Expense Ratios, Investment Fees – Expense Ratios Matter!.

How To Invest Your Cash Like A Professional

A great deal of individuals have never heard of bail bonds Morris County.
You don’t need to play the stock exchange or choose Individual Bonds and other financial investments in this manner.

Investment Fees – Expense Ratios Matter!, Watch top replays related to Do Individual Bonds Have Expense Ratios.

Who Should Invest In Shared Funds

But there is no damage in understanding what Morris County bail bonds are. Unlike stocks, you don’t need to work with a broker to perform the transaction for you. In an immediate they altered the rules in the gold video game.

What is the right type of mutual fund for you? In theory, a shared fund might include any type of openly traded market financial investment and sell you shares in it. However shared funds normally are made up of shares of stocks, money market securities, REITs (property investment trusts), bonds or a mixes of these financial investment automobiles.

Yes, financier sentiment is a contrary indication when it reaches extremes in one instructions or the other, the market normally moving contrary to what the majority anticipates.

Assuming the provider does not default on its bonds, a financier will not lose cash on Individual Bonds if they are held to maturity, when the provider returns the borrowed money to the investor. However, holding to maturity may be tough, as bond investors discovered in the late 1930’s and 1940’s, once stocks begin producing 10% to 25% in some years, while the 20-year corporate bond will continue to pay just 4.5% or whatever yearly to maturity (and on the other hand may be significantly undersea till maturity due to increasing rate of interest).

Financier sentiment for stocks has been ending up being more bullish because September, up until the survey of its members by the American Association of Individual Bonds Investors (AAII), reached a reading of 57.6% bullish in mid-November, its greatest level since 2007. It then pulled back some however remained at a high level, above 50%. And this week it increased up again, to 63.3% bullish, while the portion of bears dropped from 27.1% to simply 16.4%.

Anticipated Individual Bonds Return is the quantity of interest, dividends or capital gains that you anticipate to earn from your financial investment. The greater the anticipated return, the higher the danger.

Start the discovering process by focusing on financial investment basics. No matter what your station in life, some investments are suitable for you and some are not. For example, if you have financial issues and an unfavorable money circulation, purchasing stocks in an Individual Retirement Account or 401k must not be a concern for you.

So while you might not own any private bonds, you (or somebody you love) might have a LOTS OF money bought bonds. Or they might have money purchased stocks that are delicate to changes in rate of interest.

A little sized, one man-managed company can not be readily available. Unless you prepare yourself for this, you can be captured absolutely off guard. As of now the SBA will offer greater capability for payment and performance bonds.

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