When investing you need to look at the kind of load that it has, hopefully none, but if you had an investment already that had a load make sure you know what kind it is, if its a A or frount end, or a B which is a back end or a C that is a mix of the 2, there are also yearly fees for having an investment at a institution, these fees are normally on the account that you have under costs. If the place you have your money is a good one normally they will make it very clear what your fees are. To reduce your costs never pay any loads and have the lowest fees through index funds at Vanguard. The fees will eat up your return rather quickly if you are not careful.
I just wanted to add one last thing off of Garett’s point, since he covered the topic very well. The concept of investing is to earn some sort of return on the money invested. If you invest with these huge online brokers or other companies in the business, you will lose. They bank on you the investor not reading the fine print. A $1000 investment per year could be eroded to $800. Then, investing is like a bank that holds your money for a period of time and gives you nothing but less money in return. Companies are very tricky and charge commissions for everything. Case and point. Say you are actively trading individual stocks and you buy $100 worth of cheap shares. With some companies you would pay $10 to buy the shares and another $10 if you were to sell. You would have to reach a return of $20 or more just to break even. These companies do not look out for the small investor. Your money will evaporate very quickly if you do not take note of fees and loads.
Well said, gentlemen. You covered the information very well. Let’s review.
You first ask yourself, what am I paying in direct cost? This would include loads (commissions) or some kind of cost that you would receive in a bill. You can get rid of all of this by getting rid of active managers and going straight to Vanguard.com.
Your next concern is the indirect cost. Those are the costs that you don’t actually get a bill for, but you are paying for them. The expense ratio on a mutual fund is a perfect example. If you earned a 10% return with a 1.5% expense ratio, you actually earned 11.5%. You never got a bill for that 1.5%, but it came out of the return, that I can promise you. You can dramatically reduce this amount by going with index funds that charge you as little as .05%. A difference of 1.45%!
Bottom line: Reduce cost dramatically by getting rid of the financial “helpers” like financial advisors, life insurance agents, and investment brokers. Then go to vanguard.com and buy those really cheap index funds as you diversify your investments over many asset classes (stocks, bonds, and REITS) and many countries. Your future self will thank you one day!
When investing you need to look at the kind of load that it has, hopefully none, but if you had an investment already that had a load make sure you know what kind it is, if its a A or frount end, or a B which is a back end or a C that is a mix of the 2, there are also yearly fees for having an investment at a institution, these fees are normally on the account that you have under costs. If the place you have your money is a good one normally they will make it very clear what your fees are. To reduce your costs never pay any loads and have the lowest fees through index funds at Vanguard. The fees will eat up your return rather quickly if you are not careful.
I just wanted to add one last thing off of Garett’s point, since he covered the topic very well. The concept of investing is to earn some sort of return on the money invested. If you invest with these huge online brokers or other companies in the business, you will lose. They bank on you the investor not reading the fine print. A $1000 investment per year could be eroded to $800. Then, investing is like a bank that holds your money for a period of time and gives you nothing but less money in return. Companies are very tricky and charge commissions for everything. Case and point. Say you are actively trading individual stocks and you buy $100 worth of cheap shares. With some companies you would pay $10 to buy the shares and another $10 if you were to sell. You would have to reach a return of $20 or more just to break even. These companies do not look out for the small investor. Your money will evaporate very quickly if you do not take note of fees and loads.
Well said, gentlemen. You covered the information very well. Let’s review.
You first ask yourself, what am I paying in direct cost? This would include loads (commissions) or some kind of cost that you would receive in a bill. You can get rid of all of this by getting rid of active managers and going straight to Vanguard.com.
Your next concern is the indirect cost. Those are the costs that you don’t actually get a bill for, but you are paying for them. The expense ratio on a mutual fund is a perfect example. If you earned a 10% return with a 1.5% expense ratio, you actually earned 11.5%. You never got a bill for that 1.5%, but it came out of the return, that I can promise you. You can dramatically reduce this amount by going with index funds that charge you as little as .05%. A difference of 1.45%!
Bottom line: Reduce cost dramatically by getting rid of the financial “helpers” like financial advisors, life insurance agents, and investment brokers. Then go to vanguard.com and buy those really cheap index funds as you diversify your investments over many asset classes (stocks, bonds, and REITS) and many countries. Your future self will thank you one day!