How to Find the Investment Fees You Pay
When was the last time you read the emails a 401 (k) provider sends you, or when you downloaded the prospectus of the fund you invested in? Last year? When did you first register? Never?
If not, then you probably don’t know what commissions you are paying. In fact, 53 percent of Americans with investment accounts are unable to determine a commission on their account, according to a new NerdWallet poll. And that could mean losing a lot of money in the long run.
So how do you find them? There are several ways. First, you will need your account login information.
Advisory fees
If your account is actively managed (including by a robot), you are probably paying a consulting fee based on your total assets under management, or AUM. This is usually a fraction of a percent, such as 0.25 or 0.5 percent. This can be expressed in base points. One basis point is 0.01 percent. So 0.25 percent is 25 basis points.
You can usually find this by searching for consultant / robot and “advisory fee” or checking their website. You want to find something under 1 percent, which is easy to do given the number of advisors and robots available today.
Cost Ratios
Cost ratio is your biggest problem. This is the management fee charged by a stock company for investments such as mutual funds and ETFs. For example, if you invest in the Vanguard 2055 Target Date Fund , Vanguard charges a 0.15 percent consulting fee. Again, you can easily find a spending ratio below 1 percent, although simply a lower spending ratio will not automatically make a fund better.
This fee will not appear on your statements, but it is fairly easy to find. For example, if you have Fidelity, you can log into your account, click on the name of one of your funds, and a summary of that fund appears in a new window with information.
If you haven’t invested in a fund, you can simply google the name of the fund, and usually you can find an overview of the fund on the fund manager’s website with all the information you need.
You can also find most of the information by searching for a fund on the Morningstar website . Enter the name of the fund in the search bar and then go to the “Expenses” page. Scroll down.
Typically, larger companies like Vanguard and Fidelity may charge lower fees than smaller firms, and passively managed funds will be lower than actively managed funds.
It is expressed as an annual percentage of the assets that you have invested in this fund. Using the Vanguard 2055 example, for example, if you made a profit of seven percent for the year, your net profit would be 6.85 percent.
Administrative fees
Your plan administrator may also charge you a retirement plan fee in addition to the consultation fee and rate of expenditure fee. This is a fee for the simple administration of your account. You can find this in your quarterly report.
Bank account commission
Finally, while not investment fees, they are also important. Bank account fees are easy to find – they are listed on the bank’s website and in your monthly statements. If you find yourself paying any fees to open an account with a specific bank, contact the new bank .