Cut Investment Fees

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Cut Investment Fees

With a diversified portfolio, it's a good idea to avoid paying fees if possible -- they can really add up.­

©­iStockphoto.com/­Nick M. Do

John Bogle, the founder of the Vanguard investment firm (which holds more than $1 trillion in assets), points out that investment constitutes a $600 billion industry. That's not in investment, that's in fees alone. To paraphrase Bogle, no matter how the markets are doing, investment firms still make more than half a trillion dollars per year.

Cutting investment fees as much as possible is one sensible way of protecting a nest egg. What appear to be piddling amounts can wreak havoc over the life of a retirement account. For example, a one-time $10,000 investment that earns 8 percent annually over 25 years will have more than $16,000 (28 percent) less at maturity with a 1 percent annual fee levied against it than it would without the fee [source: NADART].

An investor will find it difficult to avoid all fees with a retirement account. It pays to look around though; some advisors charge fewer fees than others. For example, a good certified financial advisor will charge only an annual fee, usually 1 percent of the value of your portfolio. This means the advisor has ample incentive to build your wealth. Other advisors may charge transaction fees in addition to an annual fee. Familiarizing yourself with fees before signing on with an advisor can help you save money in the long run.

Be careful going overboard with ditching fees, however. Part of what you're paying for in an advisor is expertise.

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