We all approach decision making differently. Some of us race in, getting past the decision point as quickly as possible, leaving it to the facts to catch up when they are ready. Some of us agonize over every possibility, getting so caught in the “what-ifs” that we become paralyzed with indecision. Most of us are somewhere in between.
Girlfriend Guru and financial expert MIATA EDOGA reminds us that understanding our situation can help us through the decision process. Today she provides great tips for understanding how much investment funds actually cost. Here’s to great decisions girlfriend!
A new study by the financial site NerdWallet found that investors overpaid for brokerage services by more than $1.8 billion in 2011, in trading fees alone.
Think about all the shopping trips that could fund! Are you overpaying?
Here are some steps to check your fees:
1) What are you paying your financial advisor? What do you receive in return for services? Do you receive a written plan? Do you review it? How often do you meet to review your progress?
Advisors are paid one of three ways. They’re either fee-only, meaning that you write them a check for services; fee-based, which means that they charge fees but may also receive commissions from the products they recommend; and commission advisors, who charge no fees upfront but receive compensation from the products themselves.
While I’ve met good advisors who fall into each of these categories, I shy away from commission advisors. Generally, if they’re paid a commission to recommend a product that I don’t need rather than the one I should have, I have a good chance of ending up with the wrong investment.
2) Do you have mutual funds? What are the expenses of the funds? Use free sites like Morningstar.com to compare fund fees.
It’s difficult to pinpoint mutual fund fees because there are so many possibilities. There are fees to buy and sell funds (these are often referred to as loads). There are internal management fees (expressed as a percent of your investment). You may also pay advertising fees (these are called 12b1 expenses in the financial world).
Review all three of these fee types when comparing. Maybe you could find a similar fund at a lower cost.
3) What brokerage fees do you pay? Is there an account maintenance fee? Trading fees? Add these together.
Some firms charge maintenance fees for small accounts. What is the account minimum? How much do you have to invest to avoid this fee? How much do you pay to trade? If you plan on buying mutual funds, is there a small list of funds to choose from or is it a wide variety? Do I pay more for certain funds than others? (Many brokers have a free list and then an extended list of funds that you’ll pay to own.) What tools are available at the brokerage firm? I may pay more for quality tools if I’m going to take advantage of them. But, if they sit unused like my old NordicTrack, I’ll opt for the no-frills broker.
MIATA EDOGA is the President and Founder of Abundance Bound, a 10-year old company committed to utilizing humor, inspiration & lots of love to give individuals around the world the necessary tools to thrive financially, while keeping focus on the things they treasure most. Visit the Abundance Bound Facebook Page for your free copy of Financial Success for the Creative Soul!
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