Investment products and services are not free. In fact, many such products and services have lots of costs associated with them. Some apparent. Some not so apparent. Even small fees can accrue over time and have a significant impact on the value of an investment portfolio.
In short, its important to understand the fees you pay.
Before purchasing an investment product or service, you should always ask questions and look for answers. Consider asking, for example:
- What are the total initial and ongoing fees associated with this investment?
- Will it cost me anything to sell this investment?
- Can I reduce or avoid fees, for example, by purchasing the investment directly?
- When will my investment break even (from a fee standpoint)?
- If a fund, how much will the fund charge me when I buy and/or sell shares?
- If an investment professional:
- Do you get paid by commission? Some other way?
- Can I choose how to pay you?
- Should I pay per transaction or flat fee?
It’s probably a red flag if the product or service provider cannot or will not answer your questions.
If you are not yet convinced that fees matter, take a look at this info-graphic (originally provided here) and see if it changes your mind.
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Understanding Investment Product Fees