Most investors only look at the long-term gains and returns when they measure financial success. While that is a key component, it’s not the only thing to consider when it comes to portfolio management. Fees will almost always be a part of any investment you make. And while they may seem small at 1% or less sometimes, even those can put a significant dent in the success of your portfolio over a couple of decades. Some fees are higher than others, though, and we’ve taken a look at some of the highest ones to avoid as much as possible.
Investment Management Fees
Investment management fees involve fees that get paid to a human advisor. These fees can be as high as 2%, but most of them fall in the range of between 1%-2%. One way to look at this percentage is by deducting the amount of fees from your overall return. So if your investment strategies lead you to get a 6% return, but the investment management fees are 2%, then your return is only 4%. Think about this before working with an advisor and it may be best to work with someone who charges flat fees rather than a percentage.
Account fees are often taken out quarterly or annually and can be applied to almost any account. Retirement accounts most commonly charge specific account fees and can be up to about $200 per year. This may not seem like a significant amount if you have a high account balance you’ve accumulated over the years, but it can be significant if you’re just beginning an account. Try finding retirement accounts with no annual fees, like a self-directed IRA.
Load fees involve charges when you buy mutual funds. These fees are usually between 1%-3%, but can be much higher. They can be in the form of front-end fees or back-end fees and can sometimes be waived depending on the length of time you have the fund. There are mutual funds available with no load fees that investors should pursue as they are putting together their investment strategies. The small percentage of fees can add up over time, but can be easily avoided in most cases.
Robo advisors have gained popularity in recent years. However, due to the convenience of them, investors will have to pay an advisory fee annually. This fee is typically on the smaller end of the scale at up to 0.50%. The best thing to do is compare robo advisors and look closely at the services they provide and whether the advisory fees are worth it so you can get the best overall value.
Stock Investing Info helps investors with portfolio management since there are many different factors to consider. The path to financial success is rarely a straight one, and we are here for you with every twist and turn it takes. If you have any questions about the impact of investment fees on your portfolio, contact us and we would be happy to explain them to you.