How Much is Investment Management Worth?
Personal Fianance Blog did a post about his investment costs for the past year. What caught my attention with it was that his commission cost and subscription costs only came to 0.07% of his portfolio.
Mutual funds tend to charge a 1-2% management charge, which is enormous compared to gains. Take a portfolio with a 10% gain, the management fee is then 10-20% of the gain. If the gain is only 5% then it is 20-40%. And you will usually pay that fee even if the fund loses money. His fees work out to 0.8% of his gain, and that includes subscriptions.
His gain on the year was 8.77%, ahead of the S&P 3.5% gain, the DJIA 7.2% gain, but behind the Nasdaq 9.8% gain.
I haven't looked at what I paid in fees at all, yet, but they were way more than 0.07%, maybe 3-4%, but then my gain was way more than 8.77% for the year as well.