Not all investments are the same and neither are the fees associated with investing.
At Thimbleberry Financial, we’re committed to giving you all the information you need to make your investment decisions. If we’re recommending an investment, we will explain how the investment works, how much it costs, and how it impacts your long and short-term financial goals.
Every financial plan is different.
Your financial plan is designed exclusively for you and your unique financial situation. A client who is married in his 40s, working a high-level corporate job, and has kids in high school and college is different than the client who is married in his 30s, working as a college professor, and has kids in elementary school. It may appear at first they’re quite similar but the client with younger kids has more time to save for college and retirement than the one with older kids.
These differences matter when it comes to the investments that are selected.
Fees Associated with Investing
Whatever your financial goals and personal story, it is important to understand fees associated with investing, the most common of which are:
Brokerage Account Fees
There are annual fees associated with brokerage accounts that support account maintenance, access to information about trading strategies, and include trading platforms to execute trades.
The commission is based on the value of assets. Fees vary but for illustrative purposes, let’s say the commission rate is 2% of assets. The client wants to purchase 200 shares at $75 per share, the commission fee would be $300, making the total investment cost would $15,300.
Mutual Fund Transaction Fees
This is a sales fee that is charged by a broker to buy or sell mutual funds. Rates vary depending on which funds are being bought/sold.
When front-load mutual funds are purchased, the investor is charged a percentage to enter the fund. For illustrative purposes only, let’s say our client wants to buy $10,000 of a 3% front-end load fund, they would pay a fee of $300, for a total investment cost of $10,300.
When a back-load mutual fund is sold, the investor is charged a percentage to leave the fund. For illustrative purposes only, if they wanted to sell $10,000 of a 3% back-end load fund, they would receive $9,700.
These are administrative fees charged to manage the plan. If it is an employer-sponsored plan, the fees are passed on to employees, not paid by the employer. Fees are incurred whether you are a current or former employee so it’s important to have your account reviewed after you leave a job. There may be a better option for your investment.
As you think about fees associated with investing, it’s also important to understand what you’re paying and why you’re making the investment.
Think about why. Your neighbor may have a recommendation for you but that doesn’t mean it makes sense in your portfolio.
Research the payout terms. Some investments require holding a position for a period of time, whether months or years before you’re able to sell. This could be problematic if you may need that money fast or sooner than the investment terms allow.
Understand the fees. As we’ve discussed in this article, not all investments are the same so it’s important to know the costs of entering and exiting any investment.
No matter where you are in your journey of financial planning, Thimbleberry Financial is here to get to know you, your investment style and goals, and guide you to making decisions for your future.