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6 most common investing fees you’ll encounter

It is important to understand the costs associated with your investments and why you are paying them.

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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.

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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.

Investing fees

When investing, one needs to understand what you are paying for and why. (Source)

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.

Shanna has extensive experience providing a wide range of financial services to small business owners, women, individuals and couples, and members of the LGBTQ community. She knows how to explain complicated financial matters in clear language that anyone can understand and actually makes money talk interesting and fun! A veteran of the financial services industry, Shanna was 19 years old when a meeting with a financial advisor revealed her purpose and passion. The advisor dismissively reached across the desk, patted her on the head, and said, “Don’t worry sweetheart. Your husband will take care of this money stuff for you someday.” Since then, Shanna has built a career out of helping others take charge of their financial future.

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