Debt Suggestions » investing http://debtsuggestions.com Suggestions on how to deal with debt and stay out of debt Wed, 07 Jul 2010 01:29:35 +0000 en hourly 1 http://wordpress.org/?v=3.3.1 How to Invest for Less http://debtsuggestions.com/2009/04/22/how-to-invest-for-less/ http://debtsuggestions.com/2009/04/22/how-to-invest-for-less/#comments Wed, 22 Apr 2009 22:25:53 +0000 admin http://debtsuggestions.com/?p=57 In a down market, especially when many investment portfolio values have been slashed by 30 or 40 percent over the course of a year, it’s become painfully apparent that a large part of those losses comes in the form of the fees you pay to invest your money. Over a period of several decades, from [...]]]> In a down market, especially when many investment portfolio values have been slashed by 30 or 40 percent over the course of a year, it’s become painfully apparent that a large part of those losses comes in the form of the fees you pay to invest your money. Over a period of several decades, from first investment to retirement, investment costs can eat up tens and even hundreds of thousands of dollars, destroying the real rate of return of a mutual fund.

For example, an initial investment of $50,000 over a period of 25 years at 8% would grow to $342,423. However, if the gains are 6% annually due to management costs and related fees, that number drops to $214,593 – a difference of $127,830. Even a difference of one percent can be huge over time – in 35 years, receiving 8% annual on $50,000 yields 739,267; compare this to the 533,829 from a 7% return on the same money.

For the average investor, most investment fees fall into one of three categories: mutual fund expenses, investment advisor fees and brokerage commissions, the per-transaction trading fees for buying and selling individual stocks. Mutual funds have some of the highest expenses, with exchange-traded funds (ETFs) usually somewhat lower.

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