Are your investment fees affecting your investment returns?
It is important to have a smart investment plan in place. However, it is equally important to understand the kind of additional fees and expenses involved. Just like any other service, hiring a financial expert or availing investment services in any form comes at a price.
Existing fee analysis
Let’s take a look at the different kinds of fees that you might be paying your financial advisor.
- Brokerage fees: This includes an annual payment required to maintain your account with the investment broker. Depending on the subscriptions you opt for (such as access to trading platforms, premium research etc.) these fees can
- Expense ratio: As a percentage of your investment in exchange-traded funds, mutual funds and the like, this is an annual fee that you
- Trade commission: If you buy and sell stocks, this is a brokerage fee that you
- Mutual fund transaction fee: This is another brokerage fee paid when you buy/sell mutual
- Sales load: This is charged by a broker/salesperson who sells the mutual/index
There are several other fees that you might be paying depending on the type of investment portfolio that you have. You need to be aware of all your investing fees as that helps you ensure that you are not being overcharged. Remember that even a little amount of brokerage fee can add up over time so it’s best to plan for this.
Take action to save money over time
When choosing a financial professional or a particular investment plan, you should make an attempt to understand and compare all the fees that you would be expected to pay.
- Imagine all possible situations and ask as many questions as you need to get clarification at every stage.
- Ask questions about your financial advisor’s
- Review all confirmation and account statements to ensure that you are being charged
- Whenever in doubt, ask your advisor to show you a breakup of the fees you are
Analyse your portfolio to keep tabs on your numbers
When you are informed and actively involved in your investment plans, it can drastically reduce your chances of being overcharged. Here are a few areas you should pay extra attention to.
- Turnover ratios: It is important to watch out for very high turnover ratios as they may cause stocks to rise in the open market. Ideally, you should shoot for a fund that has a 50% or less turnover ratio.
- Expense ratios: A huge spread in expense ratios is a red flag. It is important that your fund manager can outperform the S&P index by an annual 5%. But if that is not happening, you could be wasting your money.
- Tax cost ratio: This is a measurement of the reduction of a fund’s annualised return by taxes that you pay on Make sure you understand all the calculations here and keep an eye out for discrepancies.
In order to stay at the top of your wealth, you should closely track your cash flow and run your portfolio through a fine-toothed comb to prevent paying excessive fees. Also, you need to ensure that your retirement plans are on track.
Capital Associates financial experts deliver the results that their clients hope for. We conduct in-depth market assessments and consultations helping to restructure your pension and savings to achieve better wealth management.