Fees, Fees, Fees….

By: ispeculatornew
Date posted: 07.31.2013 (3:00 am) | Write a Comment  (0 Comments)

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feesI’m on a mission to build myself a strong and diversified passive income that will help me become financially independent as early as possible. I write updates every month and things are certainly going well so far as you probably know. There are many different ways to get there but I’ve been working on establishing different sources of income that are diversified, sustainable and can grow over time. Investing in the stock market is a huge part of that. I’ve already explained why stock picking isn’t anywhere close to being the top criteria. Rather, the single most important factor is “investing”. How much you put and how early you start are the 2 keys.

Don’t Underestimate Fees Though

Not far behind though is trying to manage all the fees that you face while investing. For real estate that means broker commissions, taxes, etc. For investing though, it becomes a lot more complex. Why? There are “explicit fees” which are fairly clear and easy to understand:

-banking fees
-commissions on trades
-account openings, etc
-taxes

In general, banks, brokers and financial institutions will try to advertise their low rates, commissions, etc. Why? Because that’s not where they make the most money:

-management fees
-currency conversions
-etc

To this day, I don’t understand why some mutual funds continue to charge over 2% to manage funds in a way that others can do for 1/10 of that. Clearly, those paying don’t know about the alternative and what they’re paying.  Both when investing and for everyday spending, currency conversions are a huge source of profit for financial institutions. I recently came back from vacations and paid close attention to the rate that was used by my credit card company. They charged me about 3% more than the rates on that. Think about it for a second… If 3% of your vacations total cost is being charged by your credit card company without “disclosing it as a fee”, there’s something wrong as well right? I also run into this problem when buying foreign stocks, etc. It’s a real issue, one that I personally pay a lot of attention to.

How?

By paying attention. I ask more questions and look at the fees involved in my investments, my bank accounts, etc. It takes a bit of time at the start but can make a world of difference over time.

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