Day 20: Review Your Investment Fees. Lower Fees Mean Higher Returns.

Money Dad readers, it’s time to grab a magnifying glass (or just your phone) and take a hard look at something often ignored: investment fees. Yep, those pesky little charges that silently nibble away at your returns like financial termites.

You might not notice them at first—they’re sneaky that way. But over time, high fees can chomp through your hard-earned returns faster than a teenager raiding the fridge.

Here’s the deal: every dollar you pay in fees is a dollar that’s NOT working for you. Imagine your investments as a pizza (stay with me here). High fees are like ordering extra toppings you didn’t want and definitely didn’t need. Pineapple on pizza? Sure, that’s subjective. But paying 2% in fees when you could pay 0.25%? That’s objectively a bad choice.

Why Fees Matter

Let’s break it down:

• If your portfolio earns 7% annually but you’re paying 2% in fees, you’re losing nearly 30% of your returns to fees over time.

• On a $100,000 portfolio over 20 years, that could mean a difference of hundreds of thousands of dollars. (Yes, really.)

Now, I don’t know about you, but I’d rather spend those extra dollars on something I enjoy—like a vacation, a new hobby, or even just not sweating the bill at dinner.

How to Spot the Culprits

Here are the usual suspects when it comes to high fees:

1. Mutual Funds: Many actively managed funds charge high expense ratios (1%+). Look for low-cost index funds or ETFs instead.

2. Advisory Fees: Are you paying an advisor 1% of your portfolio annually? Consider a flat-fee advisor or even robo-advisors if your situation is simpler.

3. Transaction Fees: Watch out for those hidden charges from frequent buying and selling.

4. 401(k) Fees: Check your plan’s fees and see if you have lower-cost options within the plan.

The Good News

Lowering your fees is one of the easiest ways to boost your returns. It’s like finding money you didn’t know you had (but better, because now it compounds).

Quick Action Plan:

1. Audit Your Investments: Check your statements for expense ratios, advisory fees, and transaction costs.

2. Compare Alternatives: Search for similar investments with lower fees. Vanguard, Fidelity, and Schwab are great places to start.

3. Make the Switch: Transfer your money to lower-cost options. Many firms even offer free tools to help you consolidate investments.

One Final Thought

Investing is like running a marathon, not a sprint. Fees are the pebbles in your shoes—you might not notice them at first, but they’ll slow you down over the long haul. So, take off those metaphorical shoes, shake out the pebbles, and keep running toward your financial goals.

Remember: it’s not what you earn; it’s what you keep. Lower those fees, and you’ll keep a whole lot more.

See you tomorrow for Day 21, where we’ll tackle another small step toward financial greatness. Let’s keep building!