Fees Really Matter

Common fee types to watch

• Fund expense ratio: annual % charged by mutual funds and ETFs. This hits you every year automatically.
• Broker commissions: per-trade costs (many US brokers now charge $0 for plain stock/ETF trades).
• Advisory fee: % of assets paid to an advisor or robo (for example 0.25%–1.00%+).
• Hidden frictions: wide bid/ask spreads, loads, account fees, or costly complex products.

How a 1% fee compounds against you

The difference between 0.03% and 1.00% per year sounds small, but over decades it compounds like a tax on your growth.

• Imagine two investors starting with the same contributions and returns before fees.
• One uses low-cost index funds at ~0.03%. The other uses expensive funds and advice at ~1.03% total.
• Over 30–40 years, the high-fee investor can end up with tens or hundreds of thousands less, purely from cost drag.

The 0.03% vs 1% fee study shows the gap in actual simulated numbers.

Practical ways to cut fees

• Prefer low-cost index funds and ETFs for your core holdings.
• Avoid front-loaded or back-loaded mutual funds when cheaper alternatives exist.
• Be skeptical of complex products that justify higher fees with stories more than data.
• If you pay for advice, know exactly what you get for the fee and whether a cheaper model would do.

Fees you pay with your behavior

• Chasing hot funds: rotating into last year’s winners often leads to buying high and selling low.
• Over-trading: even with $0 commissions, bid/ask spreads and taxes add frictions every time you churn.
• Cash drag: leaving large balances idle in low-yield accounts while you “wait and see” is another hidden cost.