F*ck the Funds, F*ck the Fees.
I’ve seen too many people investing in unit trusts, mutual funds, saving schemes and whatever else these fee-charging mechanisms would call themselves.
One may argue that a fund manager would be better equipped and earn better returns. But please, have a look at their performance, not just that one fund that’s performing well, but a fund house’s all-encompassing funds.
Hear me now, when someone charges you a fee to manage/invest your money, be well aware.
Why? Because fees ultimately impact your investment’s growth potential. In a huge, huge way. How huge? The following simple example will illustrate.
Compounding Against You – Fees and their Impact
We have here, 3 female investors. Each earning the same 10% returns per annum, investing in 2018, RM100,000. The only difference – their fees.
Girl A invests in the stock market on her own, I’ve calculated the total fees to about 0.33%.
Girl B, 1% – a conservatively low figurer in a fund from an online platform like Fundsupermart.
And Girl C, who goes directly through a unit trust agent. Not going to name names but a 3% annual fee would be a conservative number here as well.
Now, long-term investing. Let’s have all 3 investors invest for 30 years. Example A.
Girl A (0.33% fees) will stand to have a portfolio worth close to RM1.6 million.
Girl B (1% fees) – RM1.32 million. A difference of about RM250K.
Girl C (3% fees) – RM760 thousand. A difference of RM900K.
30 years down the road, Girl A’s investment is going to be worth 2x more than her counterpart that invests at 3% fees.
Now let me show u the difference in value in 50 years. Still a reasonable time frame in my opinion.
How’s that for compounded interest. This time, compound interest is working AGAINST you.
I’ll let the figures speak for themselves. Even with a 1% fee, you stand to have an investment value that’s RM3 million less than your counterpart – Girl A. After 50 years.
As for Girl C? Well.. she’s probably going to be really happy if a unit trust agent tells her she will have RM3 million after 50 years IF her investments give her 10% annually.
But, mention her girl friend A’s investment value of RM10 million? She’s bound to go ballistic.
So, the next time someone tells you a 1% or 3% fee is nothing. You can go ahead and let loose the profanities.
Or tell them about Dividend Magic.