Commandment 10: Fees Kill

This is the tenth of a ten part series where we look at Haven’s Ten Commandments, a short list of investing fundamentals we like to teach to our clients. It’s nothing too fancy, but a good foundation we believe everyone should understand. 

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Who doesn’t like a deal? Most people today save coupons, download apps in order to get deals, or subscribe to annoying email lists hoping to get a promo code. All in an effort to save a few bucks on something they want to buy — whether that’s clothing, food, gear or homeware, you name it. 

But when it comes to investing, the vast majority of people we engage with have no idea what they are paying in fees. 

Why do people spend so much time and effort to save a few dollars on everyday things, and completely ignore the fees that could end up costing them hundreds of thousands of dollars over a lifetime? 

Is it because most people don’t understand the impact of fees? Maybe people just settle and expect all things are comparable? Or maybe we just take the advice of our parents or people who are already investing? If any of these are the case, let me explain how fees can impact your investments over your lifetime.

Whatever the reason, that isn’t the way it should be. People don’t have to settle for high fees and subpar advice and planning. 

With investing, there’s a lot of things we can not control. No one knows exactly how the markets will perform in advance. If someone did, they would long have retired to the beaches of the Caribbean.

The fact of the matter is, no matter what institution you invest through, they all have access to the same companies to invest in. Sure, they all have their own funds, or recipes. But a Growth fund from Company A should perform very similar to a Growth fund from Company B, in the same timeframe. When comparing funds, you have to compare similar funds. In a good year for stocks, a growth fund should gain a higher return than a conservative fund. 

As far as returns go, the biggest part we can control are fees. The difference between a fee of 1%, 2% and 3% doesn’t seem like a lot — I mean, difference can 1% make?? Well, let’s look at a classic example of $10,000 invested at 10% before fees. Then we will apply a 3%, 2% and 1% fee for net returns of 7%, 8% and 9% after fees. 

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Overtime the difference between the fees grows and grows to eventually after 40 years the difference of 2% between 7% and 9% becomes larger than 40 years of growth at 7%. This is crazy. And it really emphasizes what impact small fees can make on your overall portfolio, especially when you’re saving over your lifetime for retirement. 

Scrambling to save money in every area of life, then neglecting investment fees is akin to resisting the $5 Starbucks every day for 20 years in effort to “save money” — then overpaying $50,000 for a house. Financial success on the other hand, is akin to golf. You don’t need to birdie or even par every hole to shoot a great score — you just need to avoid the double and triple bogeys. Investment fees over 2% are a big triple bogey.

At Haven we are proud to be able to offer investing solutions at almost half of the industry average, saving our clients hoards of money in the long term and allowing them to keep more of their money in their own pocket. No matter where you invest you’re going to end up paying fees, with Haven you can rest easy knowing we are earning every cent and then some. And we’d be happy to show you how we do. 

**cue confetti and streamers, or the Gatorade shower** 

Congratulations! If you’ve read all ten parts of this series, than you’ve unofficially graduated from Haven’s Ten Commandments investing fundamentals. We hope you’ve learned something along the way and are in a position to make the most of your financial future. 

If you have any questions about fees, investing in general or learning about how Haven can help you, please don’t hesitate to contact us.

Derek Condon 
Financial Advisor

Josh Olfert