Are you paying fees on top of fees?

Would you be willing to give up 40% per year in investment return? While most people would balk at the thought of losing that much money, they may be doing so unknowingly if they’re paying both advisor fees and mutual fund fees. A no-frills investment advisor would likely charge around 1% per year (this figure may be higher or lower depending on the size of your account). But about one percent is often the sticker price they present to prospective clients when making the pitch to manage their money. But if your advisor is using mutual funds, then there are two investment costs that determine the real cost of your advisor: the advisor fee AND mutual fund expenses. Advisors don’t always tell prospective clients about mutual fund expenses, which can add another 1-1.5% percent. This would bring the total cost of investing with that advisor to a whopping 2-2.5%. Mutual fund expenses are embedded in the cost of the fund, so you might not even know about it unless you read each fund’s prospectus and the advisor’s disclosure brochure for any other fees you may pay. It’s always a good idea to ask what the expense ratio (that’s the fee)

May 7, 2018 No Comments

SMAs versus mutual funds

Which should you use for your financial goals? Mutual funds have been long been the choice for investors seeking professional money management. When you buy shares of a mutual fund, your assets are pooled with those of other fund shareholders, lowering costs and taking advantage of economies of scale. You gain professional money management, but be aware that a fund manager cannot tailor its portfolio to meet your individual requirements — it’s more one-size-fits-all. For investors who want or need a more customized approach — for example, in order to better manage tax liability or control individual stock holdings — separately managed accounts (SMAs) have become popular. This is especially true of those investors looking for additional investment categories like real estate, international, or small-company stocks. What is an SMA? An SMA is a personal investment account that is customized and managed for you by one or more professional money managers. In an SMA, your assets are not commingled with those of other investors. With a mutual fund, you buy and sell shares of the fund. Even though each fund share represents a proportionate ownership of individual securities within the fund, your share of each of those securities is tiny.

December 27, 2017 No Comments