Whenever people talk investing, one of the main topics that comes up is returns. How much money will investments make over time? Higher returns = better investments, right? But here’s what is often missed: How much does it all cost? Of course, returns matter, but if fees and expenses are eating up a large portion of those returns, doesn’t that kind of defeat the whole purpose?
There are plenty of people who have no idea what costs are associated with having an investment portfolio. If you’re one of them, no worries. You’re not alone, and you’ve come to the right place. Let’s get some learning on!
Here are three ways to make heads or tails of what your investment portfolio is costing you:
Ask your financial advisor:
Seems simple enough, right? You’d be surprised at how complicated that conversation can be. There are many ways your financial advisor is compensated and it all directly impacts the costs and expenses of your investments. It might be fee based, commission based, or some combination of the two. No matter what the situation is, your advisor should be able to show you exactly what he or she is charging you on an annual basis.
Be aware: There are also lots of other investing expenses in addition to your advisor’s commissions or fees. From underlying fees charged by mutual fund companies, to transaction fees charged by account custodians, to account maintenance costs charged by broker-dealers…the list goes on and on. Don’t even get us started on annuities. Digging through the expense structure in an annuity contract just might make your head explode.
Whatever the investing situation or recommendation is, your advisor should be able to easily pull the numbers on exactly what your investments are costing you, and how your accounts are performing NET OF ALL fees and expenses.
Check Yahoo!® Finance:
Yahoo! Finance is a great resource if you really want to dig deep into the expense weeds for each individual investment you own. Who WOULDN’T want to do that on a Saturday night! You can search by ticker symbol. Click the Summary tab, and you’ll see a section called “Expense Ratio”. An expense ratio is the percentage of your assets that’s taken out each year to pay for stuff: admin fees, operating costs, etc.
Keep in mind that an expense ratio doesn’t include what your financial advisor is charging you via commission or annual fee for your overall account management. That’s a totally separate cost to you.
Let us have a look-see:
If you want a second opinion, we’d be happy to review your portfolio and give you our analysis of the fees you’re being charged. We can likely give you that “big picture” view of how expenses and fees may be steadily eating away at your returns over time. Feel free to reach out to us about sending over your account statements. Having us review your investment portfolio and estimating the costs is completely free of charge. It can give you some solid insight into where you stand or whether you may want to consider making some changes to your investments in the future.
While it’s important to be cognizant of how much your investments are costing you, don’t be afraid or embarrassed if you just have no idea. It’s very common, but now’s the time to change that. Knowledge is power! Learning about these things can make you feel a lot more in control of your investments while you continue to work toward building your net worth.
If you have any questions at all about investment costs, and options that may be right for you, give us a call!
Add a Comment