Fees Shouldn’t Drive Your Investment Choices
When it comes to investing, it’s important to keep in mind that fees shouldn’t be the sole factor driving your investment choices.
Fees can certainly impact your overall returns and it is important to understand what the fees are and whether you are receiving added value for what you are paying. But fees should not be the only factor driving your investment decisions. Instead, it’s important to consider all of the relevant factors when making investment choices to ensure that you are making informed decisions that align with your long-term financial goals. Your goals should be the primary driver of your investment choices, not fees.
Fees That May Be Charged to You
Common investment management costs that may be included in fees are:
Your portfolio/fund assets are usually held by a custodian (a third-party bank or trust) as your investment manager does not have direct access to portfolio assets, only the authority to make investment decisions. The custodian charges a fee for this service.
When buying or selling securities there is usually a brokerage fee and a commission depending on whether you are using a full-service broker, discount broker, or a robo-advisor.
Investment Management Fees
For actively managed portfolios or funds, your investment manager charges you a fee for their decision-making process. This may also apply to index funds where a cost is associated with investment professionals or computerized processes rebalancing the portfolio to the benchmark index.
Management Expense Ratio (MER)
For fund investments, the fees are not always obvious. Fees may be comingled into funds as part of the Management Expense Ratio (MER). The MER can include all of the above as well as general operating costs for the mutual fund or ETF. Some MERs are 2% or higher.
Be Aware of the Fees You are Paying
Always ask for a breakdown of the fees you would pay before you commit to an investment.
Confirm the Investment Management Fee
Ask your investment manager to give you a fee schedule that makes it clear what fees they will charge you.
Confirm the Custodian Fees
Make sure you are provided with details of the custodian fees that will be charged and how they are calculated,
Confirm The Management Expense Ratios
While mutual funds and ETFs may appear to have lower fees some may carry higher MERs that reduce their returns.
Watch Out for Other Costs
If using a broker or even where you may think you are trading independently, you may find out after the fact that you have been charged brokerage fees and commissions for broker-assisted trades.
Make the Right Investment Choice
Fees may be one consideration but should not be the primary driver when making investment choices. Your investment decisions should be driven by your goals and how best to achieve them, not by the lowest fees attainable.
With investment management like everything else, you most often get what you pay for. At the low end of the fee range, you are most likely getting a passively managed index ETF where no active investment decisions are made for you.
While fees may be a little higher for active investment management, you will have a team of portfolio managers working on your behalf to add value to your portfolio through all market conditions.
At Bloom Investment Counsel Inc., we are true active managers – investments are chosen based on our in-house bottom-up analysis, with high levels of differentiation from our benchmark indices. Our portfolios are tailored specifically to each client and constructed to meet individual clients’ unique needs, objectives and goals. Overall, our portfolios have an active share of over 80% further demonstrating just how different they are from their benchmark indices, Bloom’s portfolios are built with patience, prudence and conviction in investments to build long-term wealth for our clients.
If you are you looking for a personal investment management service that can help you generate income, if needed, and growth?Let’s Talk. Call us at +1-416-861-9941 or email us at firstname.lastname@example.org
This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.