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A scary table

March 16th, 2008 at 03:44 pm

My husband informed my that he never thought much about paying 2.5% in fees for investing. After all, what's 2.5%?

What he didn't get (yes, I married a financial idiot but he's a great guy) was that the 2.5% was coming out of the entire managed assets (not just gains) and that it added up to an amazing amount of money over time.

Take a look at this table and you'll see what 2.5% can mean to your retirement nest egg:

Shouldn't a Financial ADVISOR be showing his clients this chart and carefully reviewing fees and keeping them as low as possible? But they do not. Did yours?

6 Responses to “A scary table”

  1. Ima saver Says:

    Welcome. I am like you. At the ripe old age of 44, I started learning how mutual funds, stocks and how to invest. I have done it all on my own since then and never paid a penny in commission.

  2. Anniebird Says:

    Good for you! It's really not brain surgery like they make it out to be.

    There's a huge ongoing study that found this:

    "...the BCT study found that the raw returns of equally weighted mutual funds (net of all expenses) for 1996 to 2002 were 6.626% for the investors working on their own and were 2.924% for funds provided by advisors.

    In other words, the public working on its own did more than 100% better than financial advisors when it came to selecting equity mutual funds. After factoring in inflation and taxes, clients of financial advisors lost money and lost purchasing power."

    I'll be blogging about this study in the future.

    I'm very happy to meet another diy-er.

  3. aevans1206 Says:

    Anniebird, I love you already and don't even know you! Welcome aboard and I look forward to learning much from you.

  4. Anniebird Says:

    Thank you soooo very much. You guys have no idea how much I appreciate your nice comments. Usually I have 'financial advisors' calling me terrible names and threatening me or doubletalking everything I try to say to confuse people.

    This is wonderful! Smile

  5. creditcardfree Says:

    Welcome! The fees on a mutual funds are on page 2-3 of the prospectus for every mutual fund out there. It's one of the best ways to show how much you may pay over time. I'm sure you know this...just sharing with the others! Smile

  6. Anniebird Says:

    Thanks for the welcome! Smile

    Sadly, ALL the fees are not in the expense ratio.

    And I feel badly about the fact that I haven't been able to figure out how to tell people how to calculate all the hidden fees they pay because it confuses even me. If anyone knows a simple calculation, I'd love to find out.

    Thanks much for telling people about the prospectus! It is a simple place to look. I just like Morningstar and it gives a nice overview of fees.

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