Understand your investment fees
The first thing to note here is Everyone pays fees to have their investments managed. I bump into people all the time that think they pay little, or zero in investments fees. As my dad used to say, “There’s no free lunch in this world”, and that is definitely true in the world of investing.
Today as the majority of firms are moving clients to fee based accounts, it’s more important than ever for you to understand the investment fees that you pay. Fees can have an enormous impact on your returns of your investments, and can also play a big role on whether your financial plan will succeed.
I read a survey conducted by an Independent Investment Advisory Firm “IRA Rebalance” recently, that showed 46% of respondents thought that they paid zero in fees. After digging in deeper to the investments, it was found that the fee they actually paid was closer to 1.5%. Results of the survey can be found at www.rebalance-ira.com. What catches a lot of people off guard is that if your Financial Advisor is sending your investments off to be managed by a third party, then there are more than likely two fees that are being paid. Sometimes you are able to see those directly being withdrawn from your account, and other times they are taken out of the returns of the investments.
Thankfully the financial industry is evolving with the times, and there are very inexpensive ways to get exposure to the markets, which the majority of us need to ensure the success of our financial plans. I ultimately believe the average investor should get a financial plan written to determine an appropriate asset allocation to suit your financial situation. From there you would want to implement these investments in the most efficient way possible. Remember what you ultimately receive to your bottom line, is what your investments returned, less any fees paid.
In summary, don’t be one of the 46% that has their head in the sand. Ask questions about what you own, why you own it, and what it costs…
Mick Graham is a Certified Portfolio Manager. He is the Branch Manager of Raymond James Financial Services Inc. at 3270 Suntree Blvd, Melbourne FL 32940. Phone number is 321-610-3200.
Any opinions are those of Mick Graham and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance.
Individual investor's results will vary. Past performance does not guarantee future results. Holding stocks for the long-term does not insure a profitable outcome. Investing in stocks always involves risk, including the possibility of losing one's entire investment.
