Wednesday, March 16, 2011

Fees will Flatten You

The financial industry is fat. Bloated. Littered with fee traps. Teeming with piranhas and wolves who want your money, mostly for doing nothing. Certainly nothing of value. Half the industry should not exist.

If you want to succeed at long term investing, you must minimize the fees and pay only for value received.

Here's a simple example:

Krypto invests in no fee index funds in accounts with no wrap fees and other fees. Suppose she gets 8% per annum. After 20 years, every $10,000 Krypto invested in the beginning has grown to $46,600.

You invest in funds charging fees in accounts with management fees and pay transaction fees, all together amounting to 2% per year in fees for nearly the same investments. That means your net return is 6% per year. After 20 years, every $10,000 has grown to only $32,070.

Golly, you, a gullible human, end up with about 2/3 of what my dog gets. She's retiring on filet mignon while your get fried mystery meat.

Last Friday I told you how to avoid most fees: Use Vanguard index funds and / or Vanguard ETFs in a Vanguard brokerage account. The fees are as close to zero as possible, or are zero. Just follow the investment lessons of this blog and your investments will perform exquisitely: you're guaranteed average with no fees, thus you will out perform almost every professional money manager over a 20 year time horizon.

Just do it.


It's OK to pay reasonable fees for planning and advice, particularly tax advice. Just be sure you ask what they are and understand the costs in $ and %'s. I willingly pay some fees to a broker whom helps Mrs. B learn about investing. A good husband should do that, otherwise, if he gets run over by a truck, his wife will be prey to every shark & gigolo.


Krypto is buying some Pacific stock index funds this morning. The money will come from cash.

Gold+silver is still just a weak sell - we wait. Real estate is creeping closer to a sell signal (the 5% signal).

Word of the Day

None today - have to take the trash out.


Bud said...

So Mr. Dudley tried to explain that other prices are falling. "Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful," he said. "You have to look at the prices of all things."

Reuters reports that this "prompted guffaws and widespread murmuring from the audience," with someone quipping, "I can't eat an iPad." Another attendee asked, "When was the last time, sir, that you went grocery shopping?"

Bud said...

mr dudley being fed head william question to you Bman..............

"When was the last time, sir, that you went grocery shopping?"

let it fall my ass

Bunkerman said...

On Sunday I bought ingredients for a homemade pizza at a local supermarket.

Food is still cheap. Black olives (small) 15 oz. can same price for years. Of course the sliced olives cost about triple the price per oz, but I know how to use a tool and can slice my own.

made my own crust ... sliced my own peppers ... Hormel roast chicken bits on sale 2 pkg/$5 - cheap ... grated my own cheese ...

SOME people want someone else to do all the work.

You need to learn to use tools, Bud ... that's what makes people superior to animals.


Bunkerman said...

The financial world & press need a pay cut ... let the farmers, ranchers, miners, truckers get a fair price for their products and services.

Cut fat cat pay and that of their sycophants.

Spin-em said...

Dont worry about it Bud..Bunk thinks he's special cuz he can use a fork and knife and took a DIY half trac

Spin-em said...

made my own crust

thick or thin?

Howd ya make it??? thats a future blog post if I ever heard

Spin-em said...

Id really like to know how the REIT is giving a sell signal now....we buy low and sell high right?Is it because the other stocks are down so much and the Reit arent ... so the % has become bigger??...and that tells Krypto to sell...or am I barkin up the wrong tree???pardon my french gang but somethings f'd

my readers..who are out of the market...go relax and get an ice long termers..buckle up..pucker up...this may be a bumpy