financial consultant

Saving for retirement has a lot to do with investing. This doesn’t just mean investing in stocks or bonds either, your 401(k) plan is an investment. Those who have looked into investing in stocks, probably know about the fees that are a part of all investing service accounts. Before you really jump into investing, you must understand how these fees can make a big impact on your total return on investment, or ROI. A financial advisor can help you understand how fees affect your investment. Contact the financial advisors and planners at Aureus Wealth Management to learn more about investing your money. We strive to give our customers valuable information regarding investing and retirement advice.

Expense Ratio

When an investment firm creates a mutual fund it costs money and they charge a fee for that expense. When operating expenses are charged by an investment firm, it is shown as a ratio. If your expense ratio is .90 percent if you invest $1000, $9 of that money will go towards operating expenses. However, these fees are not deducted from your account, but instead, your investment return will already include the fee percentage taken out.

Learn What a Financial Advisor Can Do For You

Investment Management Fees

Just like an expense ratio where a fee is charged for creating a mutual fund, there are also fees for managing an investment. Management fees are estimated by the total amount being managed. Typically, smaller accounts pay a larger fee, sometimes around 1.75 percent. If you have a large account and are paying fees above one percent, there may be additional services that are offered such as financial planning.

Transaction Fee

It seems like nothing is done for free when you are investing. When investment managers buy, sell, or trade a mutual fund or stock, there will be a transaction fee. Depending on the firm and the amount being sold or bought, the fee can range from $10 to over $50 per transaction. Even when you are investing small amounts, the fees can add up over time and before you know it, you could be paying more in fees than you expected.

financial plannerFront-End and Back-End Loads

This fee can be translated as a commission for the broker. A front-end load is when you purchase a share at a certain price, but the value of the share is less because this fee is deducted. A back-end load is when the share or fund is sold. Typically, the longer you keep the share, the less the amount of the fee. This is because the brokerage firm will make up the costs of the share over time.

Account Fee

Even having an investment account will cost you a fee. This is generally an annual fee that ranges from $25 to $90 per year. With a retirement account such as IRAs, the fee covers the required IRS reporting. There are firms who will charge a fee to close the account as well. However, when you are working with a financial advisor who charges a percentage of the amount being invested, the account closing fee may be waived.

Keep all of these fees in mind and make sure to ask what the percentage is, how it’s changed, and when. When you are investing, think of your entire portfolio and estimate the value after fees are deducted. Adding up these fees over time can have a significant impact on your total ROI. Knowing exactly what the fees are going into it, you can plan ahead. If you are considering investing, contact a financial consultant to make sure you understand all areas. The financial planners at Aureus Wealth Management have years of experience that you can benefit from. Get all of the retirement and investment advice from our expert financial advisors.