Earn more by paying less

Every year, investors miss out on millions of dollars that could have remained theirs.

These millions are taken from big and small investors alike, but the investors all have one thing in common—they invested their hard earned funds in high cost mutual funds.

Some people (brokers and mutual funds mostly) will claim that higher costs translate into greater returns, but the evidence does not back them up.

Death by a thousand cuts

At first glance, investment fees of 1-2% might not sound like much, but their impact grows with time. Investing is a long-term endeavor and the power of compounding interest is huge. Consider two $100,000 investments made in different mutual funds, one charging a 0.5% expense ratio and the other 1.5%. Both funds receive the same 8% return.

At the end of twenty-five years, the lower-cost fund would contain $609,000. The more expensive fund would lag by $127,000. This money is gone forever and only adds to the fund’s profits. The gap grows to a more astonishing $562,000 at the end of forty years.

Why you need to invest your time too

As with most arrangements in life, investment companies are not legally obligated to have your best interest in mind. This conflict of interest is why you need to invest time understanding how investing works.

This time investment is crucial if you find yourself having to scrimp and save to come up with money to invest. Make sure the rewards from your labor and thrift stay with you.

You can find low cost mutual funds at Vanguard, Fidelity, TIAA-CREF, & others.

For more information on increasing lowering costs and increasing your returns, check out the Four Steps to Financial Success ePamphlet.