I know this title sounds unbelievable.
And I am not sure I believe it either, but this was an email I got the other day…
He brings up a good point that most people never think about…
Those hidden fees in your investments in your 401k, 403b, or IRAs can easily cost you more than what you paid for your house.
If you haven’t done this, you should spend 15 minutes today pulling out your statements from your investments to see what the expense ratio is that you are paying.
Typically, you’ll find this number between 0.5{c87e2df4b343d0515d304e127afe4653a549475791ab451641a18e09bd64e760} and 1.0{c87e2df4b343d0515d304e127afe4653a549475791ab451641a18e09bd64e760}, but I have seen them as high as 2.5{c87e2df4b343d0515d304e127afe4653a549475791ab451641a18e09bd64e760}.
And this number represents the percentage you are paying them each year to manage the investment.
Here’s a quick example illustrating how this student could have saved $500k with this lesson from our 10x course…
Let’s say he was contributing $5k/yr to his 401k (which IRA should you invest in?), and we’ll assume he is in his 20s and does that for 40 years at a 9{c87e2df4b343d0515d304e127afe4653a549475791ab451641a18e09bd64e760} average return.
And that the expense ratio of the funds in his 401k is 1.5{c87e2df4b343d0515d304e127afe4653a549475791ab451641a18e09bd64e760} (which is high but happens a lot).
As you can see, that expense ratio of 1.5{c87e2df4b343d0515d304e127afe4653a549475791ab451641a18e09bd64e760} (which looks pretty innocent) actually is costing him over $600k by the time he retires.
Now, this student is probably following one of the popular investing strategies we discuss in our 10x investing course, where the expense ratio of the investments is 0.04{c87e2df4b343d0515d304e127afe4653a549475791ab451641a18e09bd64e760}.
(Yes you read that right, 0.04{c87e2df4b343d0515d304e127afe4653a549475791ab451641a18e09bd64e760} vs 1.5{c87e2df4b343d0515d304e127afe4653a549475791ab451641a18e09bd64e760})
So, let’s look at what happens when we make that simple adjustment…
Just by changing the fund to one that has a 0.04{c87e2df4b343d0515d304e127afe4653a549475791ab451641a18e09bd64e760} expense ratio (which anyone can do)…
He would have nearly $600k MORE money at retirement.
So if I had to guess, I’ll bet our student had a similar situation to this.
And to be honest, you might too.
So do yourself a favor and spend 15 minutes checking your statements to see what kind of fees you are paying and what the expense ratios are.
And ideally, I would like to see them be less than 0.3{c87e2df4b343d0515d304e127afe4653a549475791ab451641a18e09bd64e760}. There are certain funds where it might make sense to pay a higher fee, but that is the exception rather than the rule.
And this leads us to the unbelievably frustrating and ironic thing about the financial industry…
Often, the funds with the LOWEST fees (e.g., index funds) actually perform BETTER than the ones with higher fees (e.g., actively managed mutual funds).
That’s one of those things they didn’t teach me in school, LOL.
Anyway, do your homework and let me know what you find!
Your friend and coach,
