5 Ways You're Paying Too Much To Invest August 03, 2012 |

New Post Public Reply Private Reply Replies (0) Message Board

Dec 2, 2012 at 8:07 AM

5 Ways You're Paying Too Much To Invest August 03, 2012 | Filed Under » 401K, ETFs, Investing Basics, Investment, Mutual Funds, Retirement According to Consumer Reports, a household with two median income earners will likely pay $155,000 in fees to service their 401(k). That's roughly three years of salary for an average worker and although it's reasonable to expect a person to be paid for their services, nobody wants to overpay. That might be what's happening in your investment accounts. How do you know if you're overpaying for your investments? The truth is that it isn't easy to know. Since advisors don't print the costs of their service on a menu similar to a restaurant, sometimes you won't know until it's too late, but here are some common ways that expenses may be eating in to your gains. SEE: 6 Problems With 401(k) Plans Expense Ratio If you own mutual funds , ETFs or closed-end funds in any of your accounts, you're paying for somebody (or a team of somebodies) to manage that investment vehicle. The job of that product is to make you money, but some cost you more than others. The expense ratio tells you what percentage of your investment is taken to administer the product. Look for expense ratios that are as low as possible. Well below 1% is ideal, unless the product is significantly outpacing the market. Loads There are thousands of mutual funds on the market and although only a small percentage are offered to the investor in their 401(k), IRAs and regular brokerage accounts, you have access to most of these funds, along with many other investment products. Because of all the choices available to you, there's no reason to pay front-end or back-end load fees on your mutual funds. Look for no-load mutual funds or products outside of the mutual fund family to avoid these fees. SEE: The Lowdown On No-Load Mutual Funds Your Financial Advisor Fee-only advisors are supposed to be more trustworthy than commission-based advisors, because they have less of a conflict of interest, but giving away 1.5% or 2% of your year's gains to your advisor is hard to swallow. This means that in order for you to break even relative to the rest of the market, your account has to earn the same rate of growth plus your advisor's fee. That may not seem so bad in years where the bull was running in the market, but when it has a particularly bad year, you still have to pay the fee. Look for a fee only advisor that charges less than 1% of your total assets or somebody that charges by the service instead of an asset based fee. SEE: Paying Your Investment Advisor - Fees Or Commissions? Trading Costs If you're a retail or part-time trader, you know that every time you trade a stock, bond, ETF, mutual fund or any other product, you have to pay a fee to buy and a fee to sell. On a $10,000 account, you could lose 1% of your gains in trading costs if you trade 142 times, assuming that a trade costs $7. That may seem like a lot of trading but over the course of a year, that's not a lot of activity for an active trader. Concentrate on more long-term holdings to keep trading costs lower, or open an account that allows for frequent trading at a flat annual or quarterly rate. Taxes Mismanage your investments and expect to have a hefty tax bill. If you hold your investment for less than a year, you'll pay short-term capital gains tax of 35%. If you hold an investment for longer than one year, you'll pay 15%. If you withdraw money from your 401(k) prior to age 59 1/2, you'll pay taxes on the gains plus a 10% penalty. You can control your tax bill by holding investments for at least a year and seeking the help of a financial planner for how to properly get paid from your retirement account in the most tax-efficient way. The Bottom Line Investing is expensive - sometimes more expensive than necessary. You can't control what the markets will do in the future, but you do have a reasonable amount of control over how much you pay to invest. Paying too much can add up to a lot of money over time. Focus on what you can control instead of what you can't.

Newer

Older

Scroll down for more posts ▼

Top 10 Most Recent News Articles

Hisense Showcases AI in Everyday Living at IFA 2026

Hisense's Vision: An AI Utopia for Home Take this in: Hisense is cooking something bold at IFA 2026. They're pushing the envelope by integrating AI into our daily grind, promising to change the way we interact with the spaces that matter most. No more just dreaming about futuristic homes—these guys seem dead set on making them our everyday reality. Connected...

Tuya Smart's AI Innovations Steal the Spotlight at IFA

AI Taking Center Stage at IFA 2026 Amidst the chaos of tech exhibitions, something caught my attention—Tuya Smart's push in making AI a household name. Now, you might wonder why I’m bringing this up. Well, because it's not your typical flashy gadget talk. This is about Tuya parading their latest breakthroughs like a peacock at the world's stage, IFA 2026 in Berlin,...

Testing Grounds: Navigating PRN Test Insights

Deciphering the PRN Tester Repetition Today we're staring at what feels like déjà vu—a simple PR test peppered with the classic sentence about a fox and a dog. It's like someone left the 'repeat' function stuck on during a slow day at the office. But hey, let’s dig in. Is there something more behind this repetitive text, or are we grumbling at a wall? Unpacking the...

Roborock Fuels Market Surge with 27.6% Revenue Boost

Roborock's Rocket-Like Ascent in Global Markets Call me impressed, but Roborock is really hitting its stride. The company's been on a tear, pulling in RMB 10.084 billion during the first half of 2026—a remarkable 27.6% bump from last year. Not just content with the revenue surge, they also saw net profits jump 45.6%, making it pretty clear that they're not just playing...

Consumer365 Lauds Happy Head's Custom Hair Treatments

Revolutionizing Hair Loss Treatment The world of hair growth solutions is transforming right before our eyes. Thanks to the folks over at Happy Head and their customizable, dermatologist-prescribed treatments, the days of one-size-fits-all are ending. Consumer365 recently took a dive into Happy Head's model, giving their nod of approval to its personalized approach....

Penetron Strengthens Midwest, Central USA Support Team

Expansion of Penetron's Engineering Support Eyes are on the Midwest and Central USA as Penetron makes a strategic move to bolster their technical support dream team. They've snagged Sean Allison, a heavyweight with more than three decades' worth of grit and know-how from the construction battlefield. Sean, now stationed in the heart of America's Dairyland—Green Bay,...

Plumbing Pitfalls: When Water Heater Noises Spell Trouble

Understanding the Clamor from Your Water Heater The hustle and bustle of everyday life often drown out the less important noises. But when your water heater starts making a ruckus, maybe it's time to listen. From the keen ears of Jared Voss, a plumbing expert with his roots dug deep in Clinton, Iowa, we get the lowdown on what these noises could mean for your plumbing....

Nocpix's Evolution: New Thermal Riflescope Unveiled

Raising the Thermal Image Bar When Nocpix, known for cutting-edge electro-optical tech, teases a new thermal riflescope, it's time for hunters to perk up. This ain't just another gadget. We're talking about equipment that elevates precision and brings an edge to the field. Scheduled for hunters who mean business, this next-gen scope is destined to redefine what it means...

Shenzhen Media Push: Shaping Asia-Pacific's Future

A Metamorphosis in Shenzhen You ever hear about a place that rockets from obscurity to global significance in the blink of an eye? Well, Shenzhen, China is that place. Forty years ago, it was just a quaint fishing village. Fast forward a few decades, and you've got yourself an international powerhouse—a testament to China's rapid development strategy. Shenzhen is now...

UGREEN's AI Hub: Privacy-First Tech for Smart Homes

UGREEN's Big AI Leap In the bustling scene of home tech evolution, UGREEN's throwing its hat in the ring with its latest offerings. They've just rolled out the UGREEN HomeAgent series, aiming to redefine what we think of when it comes to smart living. UGREEN, usually known for its tech gadgets, is diving headfirst into the smart home pool. These local AI hubs blend tech...