When it comes to understanding fees associated with investing, do not be afraid to ask your financial advisor questions.
If they’re recommending an investment, they should be able to explain how it works, how much it will cost, and how that cost will impact your long-term financial plan.
Not all investments are the same, and not all financial plans are the same. A client who is single and wanting to retire in 30 years may have a different investment portfolio than a client who is seeking to retire in 10 years. Understanding the costs associated with investing is important for each of them.
Here are the most common fees:
1. Brokerage account fees
These are annual fees to maintain the account, access to research for help with trading strategy, and access to trading platforms.
2. Commission fees
A standard commission may be 1-2% of assets. For example, if a client wanted to purchase 100 shares at $50 per share and the fee was 2%, the cost would be $5,100 (50 x 100 = 5000, 5,000 x .02 = 100). Fees vary, and this is an example for illustrative purposes.
3. Mutual fund transaction fees
These are sales fees charged by a broker to buy/sell mutual funds.
4. Front-load mutual funds
The investor is charged a percentage to enter a fund.
If a client wanted to buy $5,000 at a 5% front-end load fund, they would pay $5,250. Fees vary, and this is an example for illustrative purposes.
5. Back-end load mutual funds
The investor is charged when they exit the fund.
That means if they wanted to sell $5,000 of a 2% back-end load, they would pay $100 and receive $4,900 to exit to the fund.
6. 401k fees
Administrative fees are charged to maintain the plan.
If it is an employer-sponsored plan, all or some of the fees are passed on to employees. When the employee leaves the company, they are still charged the fees.
While investment fees are part of the cost, it’s important to understand exactly what you’re paying and why:
- Just because your best friend gives you a recommendation, doesn’t mean you invest in it. Ask yourself why you’re making the investment.
- What are the payout terms? An investor may need to hold a position for a certain period of time before they can sell. This is a problem for those, especially retirees, who may need to access funds sooner than the plan allows.
- What is the commission paid? This can impact the amount an investor receives when they sell their position.
DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation in writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.
Israel vows $284 million to resolve diamond industry’s credit crunch
The 4 percent 10-year note yield will be a floor not a ceiling
Tips for expats to set up businesses in foreign countries
The landscape for rental cars is changing — here’s why
Is the recession upon us? Think global synchronized bond collapse
Cannabis acceptance grows as hemp industry leader PotNetwork Holding breaks CBD sales records
This fast-growing organic products stock already has space on Whole Foods’ shelves
Why Vapor Group Inc. might be the breakout penny stock you’ve been looking for in 2018
The CBD industry is enjoying a boost from the lifestyle sector
When you should consult your financial advisor
Promoting women’s football in Malta by UEFA projects
Euro NCAP marks its 20th anniversary with two crash tests
European Parliament’s International Trade Committee backs CETA
The American Heart Association has released four new PSAs
PwC presents 20th global CEO survey results in Switzerland
Crypto4 days ago
Could Global Blockchain Technologies change the way we invest in cryptocurrency?
Featured4 days ago
This hemp market player’s growth is about to go into overdrive
Crypto4 days ago
One of America’s oldest gold mines enters the crypto-century
Featured5 days ago
CBD stocks emerge strong in the growing cannabis industry, marijuana legalization
Featured4 days ago
The gig economy has matured — when will the business world catch up?
Business3 days ago
Why is it becoming harder for millennials to be homeowners?
Agriculture3 days ago
The benefits of supporting sustainable palm oil
Entrepreneurship2 days ago
Why being a silver entrepreneur makes a good decision post-retirement