It’s interesting that many of us take the time to scrutinize costs – electronics, clothes, cell phone, you name it – but don’t have a clue what we spend on our investments. It’s not that we don’t care but rather that it can be hard to understand; harder than, say, just looking at performance.

 

With most things in life, the more we spend, the higher the quality. So don’t you get better investing performance when you pay higher fees? The research suggests otherwise. This financial planner puts it in terms we can understand: “my research indicates that each additional 0.25 percent in annual fees pushes back your financial independence goal by a year.”

 

Is he right? Well, numerous studies of mutual funds do show the connection between higher expenses and lower performance. Case in point: “Morningstar research indicates that expense ratios are among the best indicators of how well a fund will perform in the future.”

 

Ask about, and get a handle on, all costs you may be paying: fund expenses, plan administration fees, commissions, administrative fees, etc. They all add up. Can you do better?

 

Finally, here are a couple of tools from regulatory agencies to help see how much fees can affect performance: