8. Investment Fees Are Small and Insignificant
In the short term, investment fees might not seem like a big deal. However, over the long term, fees can eat away at your investments.
“Fees are incredibly important over time,” said Jacob Lumby, founder of personal finance blog Cash Cow Couple. “Small fees compounded over many years result in the potential for large losses.”
Here’s the impact of fees on an ending account balance over 30 years:
- Tom: $100,000 growing at 7 percent, minus 3 percent in annual fees = $305,257
- Joe: $100,000 growing at 7 percent, minus 2 percent in annual fees = $415,237
- Bob: $100,000 growing at 7 percent, minus 1 percent in annual fees = $563,079
“Fees are one part of investing that investors can control,” said Lumby. “Low-cost index funds can be purchased for less than 0.10 percent in annual fees.”
