Investing your money and preparing for retirement can be a great thing, but investment fees are something that many do not think about. If you are skipping this step then you may be making a big mistake.
I recently came across some interesting facts about investments fees.
There is almost 10 times more money invested in mutual funds than exchange traded funds in the United States.
Over 75% of investors in the U.S. own a mutual fund.
This is a problem because mutual funds on average cost six times as much as an exchange traded fund. The average fee deducted from a mutual fund each year is 1.5%, whereas the average fee deducted from an exchange traded fund is just 0.25%.
That is a HUGE difference!
According to the infographic below as well, if you pay just 2% per year as a fee on an investment of $100,000, this means that you will have paid over $350,000 in a 30 year period! $350,000 is nothing to sneeze at – that’s a lot of money that is being wasted!
Another reason for why this is a problem is because mutual funds tend to underperform exchanged traded funds, so many are paying crazy high portfolio management fees on their investments and not getting the best return that they should be.
Even with all of the above, most do not know what their investment fees are, or that they are even paying them. Sadly, this is partly due to the fact that some investment advisors try to hide the fact that there are investment fees. High portfolio fees can cost you retirement money and cause you to retire later in life too!
Learn more about what you are paying.
If you are interested in learning more about how portfolio expenses may be impact you, I recommend you check out DRAFT. DRAFT is an app (currently in private alpha), that uses crowdsourced data to help users understand their portfolio and compare it, such as performance and expenses, against others in their peer group.
DRAFT's core mission is to use crowdsource data to help you understand your portfolio and compare it, in aspects like performance and expenses, with others. One of the key missions is to understand your expenses and knowing whether you're “getting your money's worth” and to show you how others are doing.
The data that DRAFT is providing is extremely helpful and hopefully you will be able to save more of your money by doing some simple research.
The app is expected to be released in the early fall but you can sign up for their waitlist now so that you are one of the first to be able to try their application out.
Check out the infographic below to learn more about the investment fees you may be paying.
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